MUNICIPAL  OWNERSHIP 


Municipal  Ownership 

A  Brief  Survey  of  the  Extent,  Rapid  Growth 

and    the   Success    of   Municipal    Ownership 

Throughout    the    World,    Presenting    the 

Arguments  Against  Private  Ownership, 

the  Failure   of   Regulation   and   the 

Advantages  of  Municipal  Ownership 

BY 

CARL  D.  THOMPSON 


NEW  YORK 

B.  W.  HUEBSCH 

MCMXVII 


COPYRIGHT,  1017,  BY 
B.  W.  HUEBSCH 


PRINTED  IN   THE   UNITED   STATES  07  AMEBICA 


TO  THE  PEOPLE  WHO  MUST  LIVE 
AND  LABOR  IN  THE  CITIES  OF 
AMERICA,  I  DEDICATE  THESE  PAGES 


392431 


INTRODUCTION 

Surely  and  steadily  throughout  the  world, 
municipal  ownership  is  winning  its  way.  More 
than  a  half  century  of  experience  of  every  con- 
ceivable form  and  under  all  sorts  of  conditions 
has  put  the  matter  beyond  the  realm  of  theory 
and  experiment  in  all  of  the  older  countries. 
Even  in  the  United  States,  and  especially  in 
recent  years,  it  is  rapidly  gaining  ground.  And 
in  this,  as  in  all  matters,  it  is  practical  experi- 
ence that  carries  more  weight  than  all  the  other 
arguments. 

Whatever  else  may  be  said  against  municipal 
ownership,  it  is  pretty  hard  to  meet  the  argu- 
ment drawn  from  practical  experience.  The 
mere  fact  that  hundreds  and  even  thousands  of 
cities  have  experimented  with  municipal  owner- 
ship of  one  form  or  another,  and  after  doing 
so  have  continued  the  system  and  extended  it; 
the  mere  fact  that,  as  a  whole,  cities  embarking 
upon  a  career  of  municipal  ownership  are 
always  extending  it  rather  than  restricting  it; 

vii 


viii  INTRODUCTION 

the  fact  that  the  number  and  proportion  of  the 
cities  of  the  world  adopting  some  form  of  mu- 
nicipal ownership  is  steadily  and  constantly 
increasing — these  facts  constitute  a  pretty 
strong  argument  in  favor  of  the  system  both 
in  theory  and  practice.  For  surely  if  there 
were  any  really  serious  defect  in  the  theory  or 
any  fatal  weakness  in  the  plan,  it  would  have 
been  discovered  somewhere  in  this  wide  range 
of  experience  and  proclaimed  to  the  world. 
Furthermore,  such  a  discovery,  if  really  estab- 
lished, would  have  arrested  the  progress  and 
stemmed  the  tide  of  municipal  ownership. 

First  of  all,  then,  we  take  up  in  our  first  chap- 
ter the  extent  and  growth  of  municipal  owner- 
ship. In  the  following  chapters  we  deal  with 
the  disadvantages  of  private  ownership,  the 
failure  of  regulation,  and  the  advantages  of 
public  or  municipal  ownership. 


CONTENTS 

CHAPTER  ,  PAGE 

INTRODUCTION vii 

I    THE  EXTENT  AND  GROWTH  OP  MUNICIPAL 

OWNERSHIP 1 

1.  Municipal    Ownership    in    the    United 

States    1 

Water  Works— Electric  Light  Plants 
— Gas  Plants — Street  Car  Lines — 
Subways — Docks,  Warehouses  and 
Ferries — Parks  and  Play  Grounds — 
Libraries — Schools  and  Universities 
— Municipal  Theaters — Other  Forms 

2.  Municipal  Ownership  in  Canada     .     .     12 

Electric  Light  and  Power  Plants — 
Water  Works—Street  Car  Systems 
— Other  Forms 

3.  Municipal  Ownership  in  Europe  ...     15 

In  England — In  Germany 

4.  Municipal  Ownership  in  General     .     .     19 

Land — Dwellings — Bakeries  —  Flour 
Mills  —  Milk  —  Foods  —  Farming  — 
Slaughter  Houses  —  Drug  Stores  — 
Restaurants  —  Brick  Works  —  Funer- 
als —  Crematoria 
ix 


x  CONTENTS 

CHAPTER 

II    THE  CASE  AGAINST  PRIVATE  OWNERSHIP    .    26 

1.  Private  Ownership  Wrong  in  Theory  .     26 

2.  The  Testimony  of  Actual  Experience  .     33 

Excessive  Kates  —  Poor  Service  — 
Bad  Labor  Conditions  —  Over-Capi- 
talization and  Other  Financial 
Frauds — Enormous  Private  Profit — 
Concentration  of  Wealth  and  Power 
— Evil  Influence  in  Politics 

III  THE  FAILURE  OP  REGULATION     ....    60 

1.  In  Foreign  Countries  ......     63 

England  —  Switzerland  —  Italy  — 
France  —  Germany 

2.  In  the  United  States 66 

Rates  Increased — Municipal  Owner- 
ship Blocked — Private  Incomes  In- 
creased— Large  Consumers  Favored 
— Helps  Keep  Labor  in  Subjection — 
Endless  Delays 

IV  THE  ADVANTAGES  OF  MUNICIPAL  OWNERSHIP    79 

1.  In  Organization  and  Operation  ...  80 
City  Can  Borrow  Money  at  Lower 
Bates — No  Dividends  on  Watered 
Stock — Under  Complete  Municipal 
Ownership  No  Interest  or  Dividends 
—  No  Corruption  Funds  —  Cost  of 
Regulation  Saved — Co-ordination  of 
All  Public  Utilities 


CONTENTS  xi 

PAGE 

2.  Advantages  to  the  Public 86 

Lower  Rates — Better  Service — Prof- 
its Go  to  the  Public— Tends  to  Ele- 
vate Civic  Standards — Better  Social 
and  Industrial  Adjustment 

3.  Advantages  to  Labor 102 

Organized  Labor  Favors  Municipal 
Ownership  —  Better  Wages,  Shorter 
Hours  —  Reduces  Cost  of  Living  — 
Fewer  Strikes  and  Labor  Troubles — 
Other  Advantages 

IN  CONCLUSION      .     .  .  113 


MUNICIPAL  OWNERSHIP 


THE  EXTENT  AND  GROWTH  OF 
MUNICIPAL  OWNERSHIP 

1.  Municipal  Ownership  in  the  United  States 

Municipal  ownership  is,  of  course,  much  less 
extensive  in  the  United  States  than  in  the 
European  countries.  Yet  there  is  enough  here 
to  constitute  a  really  imposing  array.  And 
what  is  even  more  important,  the  number  and 
extent  is  increasing  rapidly. 

Waterworks — For  example,  at  the  beginning 
of  the  last  century,  there  were  16  water  plants 
in  the  United  States,  only  1  of  them  was  munic- 
ipally owned.  By  the  close  of  the  century 
there  were  perhaps  3500  plants,  more  than  half 
of  which  were  publicly  owned  and  200  of  which 
had  changed  from  private  to  public  ownership. 
Practically  every  one  of  the  larger  cities  owns 
its  water  plants,  the  only  exception  being 


2  MUNICIPAL  OWNEBSHIP 

San  Francisco.  And  of  all  the  cities  of  the 
United  States  of  30,000  population  and  over, 
there  are  150  municipal  to  50  private  plants,  or 

3  public  to  1  private.1 

If  there  had  been  anything  wrong  with  the 
theory  or  the  practice  of  municipal  ownership 
in  the  matter  of  waterworks,  it  would  have  been 
discovered  long  ago.  As  a  matter  of  fact,  it 
has  been  the  unfailing  success  and  overwhelm- 
ing evidence  of  the  superiority  of  municipal 
ownership  that  has  brought  it  to  the  front  so 
rapidly  and  steadily. 

Electric  Lighting — A  similarly  rapid  growth 
has  taken  place  in  electric  lighting.  The  first 
municipal  lighting  plant  was  established  in  1881. 
At  that  time  there  were  7  private  plants.  From 
that  time  forward  the  number  of  municipal 
plants  increased  rapidly,  until  by  1912  there 
were  1562  municipal  plants.  Moreover,  the 
percentage  of  increase  of  municipal  plants  has 
been  much  greater  during  the  ten  years  ending 
with  1912  than  that  of  the  private  plants,  the 
percentage  of  increase  for  private  plants  being 

i  See  Annals  of  the  American  Academy  of  Political  and 
Social  Science,  for  January,  1915,  p.  279;  also  "Municipal 
and  Private  Operation  of  Public  Utilities,"  pt.  I,  vol.  I,  pp. 
127-8. 


EXTENT  AND  GBOWTH  3 

30.4,  while  that  of  the  public  plants  was  91.7. 
The  whole  process  is  shown  by  the  following 
table: 

Electric  Lighting  Plants  in  United  States2 

Per  cent,  in- 

1912  1907  1902       crease  1912 

Total   number   of  over  1902 

stations    5,221  4,714  3,620  44.2 

Commercial    3,659  3,462  2,805  30.4 

Municipal   1,562  1,252  815  91.7 

Moreover,  the  percentage  of  municipal  plants 
has  also  increased,  as  shown  by  the  following 
table: 

Growth  in  United  States  of  Municipal  and  Private 
Electric  Light  Plants        per        of 

Year                       Municipal  Private  Total  municipal 

Number  plants 

18813    1  7  s 

1885    16  151  167  9.5 

1890    137  872  1,009  13.5 

1895    386  1,690  2,076  18.5 

1900    710  2,514  3,224  22.02 

1902    815  2,805  3,680  22.5 

1905  (Sept.)*....     988  3,076  4,064  24.3 

1906  (Mar.)    1,660  3,234  4,284  24.4 

1912  s    1,562  3,659  5,221  29.9 

2  Bulletin  No.  124,  Central  Electric  Light  and  Power  Sta- 
tions and  Street  Electric  Railways,  1912,  Department  of  Com- 
merce, Bureau  of  the  Census. 

3  Figures  for  1881  to  1902  from  United  States  Census  of- 
fice.    Special  report  on  central  electric  light  and  power  sta- 
tions, 1902,  p.  106. 

*  Figures  for  1905  and  1906  from  Central  station  lists, 
September,  1905,  and  March,  1906. 


4  MUNICIPAL  OWNEESHIP 

Moreover,  while  there  have  been  13  plants  that 
have  changed  from  public  to  private  ownership, 
there  have  been  170  plants  that  have  changed 
from  private  to  public  ownership.  In  other 
words,  for  every  electric  light  plant  that  has 
given  up  municipal  ownership  after  trial  and 
gone  over  to  private  ownership,  13  plants  have 
gone  in  the  opposite  direction  from  private  to 
public  ownership.6 

Thus  the  experience  of  34  years  in  municipal 
electric  lighting  bears  a  similar  testimony  in 
favor  of  municipal  ownership  as  the  experience 
in  municipal  waterworks. 

Gas  Plants — The  development  of  municipal 
ownership  in  the  field  of  gas  production  has 
been  less  rapid.  And  the  reasons  are  obvious. 
The  development  of  electricity  as  a  mode  of 
lighting  is  more  practical  and  convenient  for 
municipal  purposes,  and  besides  is  better  suited 
to  small  cities  where  municipal  ownership  in 
lighting  has  had  its  chief  development.  More- 

6  Bulletin  No.  124  of  United  States  Census,  1912,  above 
referred  to.  (Municipal  Electric  Lighting,  by  Ernest  Brad- 
ford Smith,  Bulletin  No.  5,  Wisconsin  Free  Library  Commis- 
sion, April,  1906.) 

e  "Municipal  and  Public  Ownership  of  Public  Utilities," 
vol.  I,  pt.  I,  p.  162. 


EXTENT  AND  GROWTH  5 

over,  gas  manufacturing  coming  earlier  than 
electricity,  the  private  companies  had  secured 
long-term  franchises  which  prevented  municipal 
ownership  in  that  direction  more  than  in  the 
field  of  electricity. 

However,  there  has  been  considerable  devel- 
opment even  in  this  direction.  There  were  only 
9  municipal  gas  plants  in  the  United  States  in 
1890,  and  only  15  in  1899.  By  1907,  there  were 
25  in  the  United  States  and  10  in  Canada.  Com- 
paring this  with  the  growth  of  the  private 
plants,  the  report  of  the  Civic  Federation  finds 
that  the  number  of  private  plants  has  grown 
about  48  per  cent,  and  the  number  of  municipal 
plants  67  per  cent,  in  6  years.7 

Street  Car  Lines — The  first  city  in  the  United 
States  to  undertake  the  municipal  ownership 
of  its  street  car  lines  was  Monroe,  Louisiana. 
That  city  took  over  its  lines  about  fifteen  years 
ago  and  reports  indicate  that  the  lines  have 
been  making  a  surplus  of  over  $16,000  per  year 
in  recent  years. 

St.  Louis,  Missouri,  has  operated  a  short  elec- 
tric line  in  connection  with  its  waterworks  plant 

i  "Municipal  and  Public  Ownership  of  Public  Utilities," 
pp.  146-7. 


6  MUNICIPAL  OWNEKSHIP 

for  some  years,  but  it  is  a  very  small  part  of  the 
city's  transportation  system. 

San  Francisco  is  the  first  city  of  any  size  to 
really  go  into  the  municipal  ownership  of  its 
street  car  lines.  After  nearly  ten  years  of  agi- 
tation, and  after  ten  years  of  struggle  in  re- 
peated elections,  and  after  encountering  and 
overcoming  all  sorts  of  court  proceedings  and 
other  difficulties,  the  city  finally  started  its  first 
municipal  cars  in  December,  1912.  Since  then 
it  has  steadily  developed  its  system  until  at  the 
end  of  the  fiscal  year  1915  it  had  a  total  of  43.04 
miles  of  track  with  197  cars  in  operation,  and  up 
to  that  time  the  city  had  made  a  total  profit  of 
$420,402.49.  The  net  profit  for  the  year  ending 
June  30,  1915,  was  $82,135.30.8 

Subways — In  large  cities,  such  as  New  York, 
Chicago,  Philadelphia,  Boston,  and  Pittsburgh, 
a  subway  for  the  transportation  system  seems 
indispensable.  And  the  tendency  in  subways  is 
in  the  direction  of  municipal  ownership.  Bos- 
ton owns  a  twenty-six  million  dollar  subway 
system.  New  York  has  built  and  is  building  a 

8  Financial  Report  of  the  Municipal  Railroad  of  San  Fran- 
cisco. 


EXTENT  AND  GROWTH  7 

subway  system,  the  total  cost  of  which  will  ex- 
ceed $200,000,000.  The  original  subways  cost 
$50,000,000  and  were  built  by  the  city  and  leased 
to  a  private  company,  thus  securing  ownership 
without  operation.  The  new  subway  system 
will  cost  $180,000,000  and  is  being  built  by  a  sort 
of  partnership  between  the  city  and  private  com- 
panies. In  each  case,  however,  the  ultimate  aim 
is  municipal  ownership.9  Chicago  has  an  elab- 
orate street-car  franchise  which  provides  that 
55  per  cent,  of  the  net  profits  from  the  street- 
car lines  now  operating  in  the  city  shall  be  set 
aside  as  a  fund  for  the  ultimate  establishment 
of  a  municipally  owned  system,  including  a 
subway. 

Docks,  Warehouses,  and  Ferries — The  im- 
portance of  the  public  control  of  the  terminal 
facilities  of  water  transportation  has  driven 
many  cities  to  extensive  municipal  ownership 
of  docks,  warehouses,  ferries,  and  piers.  Bal- 
timore owns  5  miles  of  water  frontage  and 
7500  feet  of  docks,  including  a  great  commerce 
and  recreation  pier.  New  York  owns  349  miles 

9  "American  Municipal  Problems,"  by  Charles  Zueblin,  pp. 
34-40. 


8  MUNICIPAL  OWNERSHIP 

of  water  front,  235  warehouses,  piers  that  bring 
the  city  a  rental  of  $4,772,885  a  year,  and  fer- 
ries that  bring  over  a  million  more.  Both  Bos- 
ton and  Chicago  have  recently  built  magnificent 
municipal  piers.  They  are  the  largest  in  the 
world.  The  Boston  pier  cost  $3,500,000,  is  1200 
feet  long  and  400  feet  wide.  The  Chicago  pier 
is  built  out  into  the  lake  3000  feet,  is  290  feet 
wide,  and  cost  $4,000,000.  New  Orleans  owns 
twelve  miles  of  belt  railroad,  joining  its  docks 
and  its  trunk-line  railroads.  San  Francisco 
owns  and  operates  one  of  the  best  ferry  systems 
in  the  United  States.  Other  and  smaller  cities 
are  also  successfully  owning  and  operating  va- 
rious forms  of  water-terminal  systems. 

Parks  and  Playgrounds — The  municipal 
ownership  represented  in  parks  and  play- 
grounds in  modern  cities  is  enormous.  Chicago 
has  invested  no  less  than  $30,000,000,  and  the 
support  of  its  park  system  together  with  its 
playgrounds,  small  parks,  and  squares  requires 
over  $2,000,000  a  year.10  New  York  now  sup- 
ports 8000  acres  of  park  area,  10  acres  of  which 
alone  cost  $5,237,000.  Chicago  has  4230  acres 
of  parks;  St.  Louis,  2286;  Baltimore,  2401; 

10  "American  Municipal  Problems,"  pp.  274-75. 


EXTENT  AND  GEOWTH  9 

while  Boston  with  its  famous  Common  and  its 
public  gardens  and  its  numerous  small  parks 
and  playgrounds  boasts  of  the  best  park  system 
in  the  world. 

If  the  park  systems  of  all  the  cities  of  the 
United  States  are  taken  together  the  invest- 
ment in  this  form  of  municipal  ownership  alone 
is  truly  enormous. 

Libraries — There  are  1844  public  libraries  in 
the  United  States  with  an  annual  expenditure  of 
$14,756,567,  and  a  capital  investment  of  $109,- 
717,908.  By  far  the  greater  part  of  this  invest- 
ment is  in  the  cities,  and  represents  another 
phase  of  successful  municipal  ownership  and 
operation. 

Schools  and  Universities — The  whole  public 
school  system  is  an  example  and  perhaps  the 
most  striking  example  of  successful  public  own- 
ership. And  while  the  system  is  general  in  its 
nature,  it  has  by  far  its  widest  extent  and  most 
complete  development  within  the  municipalities. 
There  are  590,000  people  employed  in  the  public 
schools  of  the  United  States,  with  an  annual  ex- 
penditure of  $550,000,000,  and  a  capital  invested 
of  $1,500,000,000.  The  kindergartens,  manual 
training,  domestic  science,  school  gardens,  open- 


10  MUNICIPAL  OWNEBSHIP 

air  schools,  and  vocational  training  have  all 
had  their  earlier  and  fuller  development  in 
the  city  schools.  And,  finally,  many  cities  have 
in  recent  years  established  municipal  universi- 
ties especially  adapted  to  the  needs  of  city  life 
and  its  problems.  The  city  of  New  York  spent 
$5,000,000  in  erecting  the  buildings  of  the  Col- 
lege of  the  City  of  New  York  and  is  maintain- 
ing the  institution  at  a  cost  of  $600,000  per  year. 
Cincinnati,  Akron,  and  Toledo,  Ohio,  all  have 
universities  more  or  less  distinctly  municipal  in 
their  functions  and  in  the  matter  of  support  and 
control. 

Municipal  Theaters — Bed  Wing,  Minnesota, 
established  a  municipal  theater  in  1904.  North- 
ampton, Massachusetts;  Concordia,  Kansas; 
Hennessey,  Oklahoma,  and  several  other  cities 
have  embarked  in  this  field  of  municipal  owner- 
ship and  operation  with  varying  degrees  of 
success. 

Other  Forms  of  Municipal  Ownership — Be- 
sides the  above  more  common  forms  of  munici- 
pal ownership  there  are  many  others  less  com- 
mon. The  city  of  Boston  owns  and  operates 
very  successfully  a  large  printing  plant.  Brook- 
ings,  South  Dakota,  owns  a  telephone  system. 


EXTENT  AND  GEOWTH  11 

Cincinnati  owns  a  steam  railroad  over  300  miles 
long,  traversing  three  States.  It  is  owned  by 
the  city  and  leased  to  a  private  corporation  for 
operation.  The  city  derives  a  revenue  of  over 
$526,000  a  year  from  the  road.  Weatherford, 
Oklahoma,  and  several  other  cities  own  and 
operate  municipal  ice  plants.  Mention  should 
also  be  made  of  municipal  public  baths  which 
are  becoming  quite  general  and  which  in  New 
York  city  represent  an  investment  of  $1,700,000 
and  an  annual  expenditure  of  $750,000  a  year; 
of  public  laundries,  municipal  band  concerts, 
dances,  motion-picture  shows,  and  other  means 
of  public  amusement  which  formerly  were  en- 
tirely under  private  ownership  and  control  but 
which  now  are  more  and  more  being  taken  over, 
owned,  and  operated  by  the  municipalities. 

And  all  this  makes  no  mention  of  the  vast 
systems  of  roads,  boulevards,  and  bridges  main- 
tained by  the  cities  everywhere ;  of  comfort  sta- 
tions, of  municipal  markets,  of  municipal  news- 
papers, of  innumerable  hospitals  of  all  kinds, 
of  sanitaria  and  institutions  for  the  defective 
and  delinquent,  and  other  forms  of  municipal 
ownership  and  operation  more  or  less  common 
to  the  American  cities. 


12  MUNICIPAL  OWNERSHIP 

Thus  the  weight  of  practical  experience  in 
the  ownership  and  operation  of  public  utilities 
in  the  United  States  stands  overwhelmingly  on 
the  side  of  municipal  ownership. 

2.  Municipal  Ownership  in  Canada 

Municipal  ownership  is  proportionately  more 
extensively  developed  in  the  cities  of  Canada 
than  in  the  United  States.  This  is  particularly 
true  of  electric  lighting  and  street  car  lines. 

Electric  Light  and  Power — In  the  province 
of  Ontario,  and  particularly  in  that  section  adja- 
cent to  the  Niagara  Falls,  municipal  ownership 
has  had  a  peculiar  and  interesting  development. 
Some  twenty  municipalities  have  cooperated 
in  the  formation  of  a  commission,  which 
in  conjunction  with  the  provincial  government, 
has  installed  transmission  systems  for  the  pur- 
pose of  delivering  electricity  from  the  hydro- 
electric power  plants  at  Niagara  Falls  to  be  de- 
livered at  cost  to  the  municipalities,  the  munici- 
palities in  turn  delivering  it  at  cost  to  their  own 
power  and  light  consumers  through  municipally 
owned  distribution  systems. 

Toronto,  the  commercial  as  well  as  the  politi- 


EXTENT  AND  GBOWTH  13 

cal  capital  of  the  province,  has  naturally  taken 
the  lead  in  this  line  and  has  established  and  de- 
veloped a  distributing  system  that  will  cost, 
when  completed,  $6,200,000. 

In  Western  Canada,  Winnipeg  has  taken  the 
lead  in  the  municipal  ownership  of  hydro-elec- 
tric power  plants.  In  this  case  the  city  owns 
and  operates  not  only  the  distributing  system, 
but  the  transmission  lines,  which  are  77  miles 
in  length,  and  the  generating  plant  as  well. 
The  entire  plant  is  valued  at  $6,724,372,  and 
supplies  electricity  at  3l/2  cents  per  kilowatt 
hour.11 

Calgary  owns  its  distributing  system  and  also 
a  plant  that  generates  a  part  of  the  electricity 
it  uses,  the  remainder  being  purchased  from  a 
private  company. 

Seven  other  cities  in  the  "prairie  prov- 
inces" own  and  operate  their  light  plants, 
among  them  Edmonton,  Kegina,  and  Medicine 
Hat. 

Water  Plants — Practically  all  of  the  leading 
cities  of  Canada  own  and  operate  their  water 
plants.  The  municipal  plant  at  Winnipeg  is 

11  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  Jan.,  1915,  pp.  246-253. 


U  MUNICIPAL  OWNERSHIP 

valued  at  $6,346,606.  In  that  section  some 
seven  or  eight  cities  have  joined  with  Winni- 
peg, establishing  what  is  known  as  the 
"Greater  Winnipeg  Water  District,"  for  the 
purpose  of  cooperating  in  the  public  ownership 
and  operating  of  the  water  systems  and  the  de- 
livery of  water  to  the  various  municipalities  at 
cost. 

Street  Car  Lines — Calgary  has  owned  and 
operated  its  street  car  lines  since  1909.  To- 
ronto purchased  its  lines  in  1891  and  re-sold  or 
rather  leased  them  on  an  agreement  that  has 
brought  the  city  as  high  as  $500,000  per  year, 
suggesting  what  might  have  been  done  under 
complete  municipal  ownership. 

Other  Forms  of  Municipal  Ownership — Be- 
sides the  ownership  of  electric  light  and  power 
plants,  waterworks  and  street  car  lines,  many 
of  the  Canadian  cities  own  and  operate  other 
public  utilities.  Winnipeg,  for  example,  owns 
and  operates  gas  works,  quarries,  cemeteries, 
baths,  comfort  stations,  and  a  municipal  gravel 
pit.  Calgary  owns  and  operates,  besides  its 
street  car  lines,  waterworks,  an  electric  light 
and  power  plant,  an  asphalt-paving  plant,  a 
municipal  market,  stores  and  purchasing  de- 


EXTENT  AND  GKOWTH  15 

partments,  incinerators,  and  holds  for  sale  at 
cost  industrial  sites  for  manufactures. 

Thus  in  Canada,  as  well  as  in  the  United 
States,  municipal  ownership  has  scored  notable 
victories,  and  the  weight  of  practical  experience 
goes  to  the  side  of  public  ownership. 

3.  Municipal  Ownership  in  Europe 

The  experience  with  municipal  ownership  in 
the  United  States  and  Canada,  favorable  as  it 
is,  is  only  a  suggestion  compared  to  the  ex- 
perience in  Europe.  There,  as  is  well  known, 
municipal  ownership  has  gone  much  farther  and 
is  much  more  conclusive  in  its  results  than  in 
this  country. 

Speaking  of  the  tendency  to  municipal  owner- 
ship in  Europe,  in  the  Annals  of  the  American 
Academy  of  Political  and  Social  Science,  for 
January,  1915,  Frederic  C.  Howe,  who  is  per- 
haps the  foremost  student  of  this  subject  in  the 
United  States,  says : 

"Municipal  ownership  in  Europe  is  largely 
the  product  of  the  last  twenty  years.  It  has  be- 
come the  universally  or  almost  universally  ac- 
cepted policy  in  Great  Britain,  and  only  to  a 
less  extent  is  it  the  accepted  policy  in  Germany 


16  MUNICIPAL  OWNERSHIP 

and  Switzerland,  while  to  a  somewhat  lesser  de- 
gree is  it  accepted  in  Italy,  Austria-Hungary, 
and  the  Scandinavian  countries.7' 

England — The  extent  to  which  municipaliza- 
tion  has  gone  in  England  may  be  seen  from  the 
following  table,  from  which  it  will  appear  that 
in  some  fields  it  already  dominates  the  situ- 
ation : 

Municipal  Ownership  in  England12 

Public  Undertakings  Private  Undertakings 

Kind  of  Enterprise      No.  Total  Cap'l          No.       Total  Cap'l 

Water    1,045  $330,914,401         251       $197,850,964 

Gas    256  173,919,089         454         375,348,459 

Electricity    334  155,728,000         174         133,838,750 

Street  railways. . .     142  199,061,278         154          83,660,551 

1,777      $779,622,858      1,033       $790,688,724 

Speaking  of  this  process  of  municipalization 
in  English  cities,  in  another  place,  the  same 
author  says: 

"  Municipal  ownership  in  Great  Britain  has 
become  an  issue  of  wider  scope  than  the  owner- 
ship and  working  of  street  railways,  gas,  electric 
lighting,  and  water  services.  These  so-called 
natural  monopolies  have  been  very  generally 
taken  over  by  the  cities.  But  the  movement  has 

12  From  "The  British  City,"  by  Frederic  C.  Howe,  p.  71. 


EXTENT  AND  GEOWTH  17 

not  stopped  there.  In  various  places  it  has 
come  to  include  municipal  dwellings,  docks, 
markets,  and  baths,  race  courses,  oyster  fish- 
eries, slaughter  houses,  milk  depots,  employment 
bureaus,  and  sewage  farms.  The  Brighton  cor- 
poration owns  the  local  race  course,  from  which 
it  derives  a  revenue  of  from  $10,000  to  $15,000 
a  year.  Municipal  theaters  have  been  opened 
at  Brighton  and  Southborough,  West  Ham  man- 
ufactures its  own  paving  stones  and  sells  them 
to  contractors  at  a  profit.  Colchester  has  a 
municipal  oyster  bed.  Manchester  produces 
soap,  oil,  tallow,  and  mortar  as  residuals  from 
its  gas  and  other  industries.  Many  cities  sup- 
plying gas  deal  in  stoves  and  gas  fittings. 
Others,  dealing  in  electricity,  wire  the  houses 
and  supply  them  with  fittings.  Southport  and 
Bradford  are  advocating  municipal  tailoring  es- 
tablishments to  manufacture  the  uniforms  of 
town  employees. 

"A  number  of  cities  supply  sterilized  milk 
for  children,  and  the  ultimate  municipalization 
of  the  entire  milk  supply  is  being  urged.  Glas- 
gow maintains  an  institution  for  the  cure  of  in- 
ebriates. Wolverhampton  sells  ice  to  the  trad- 


18  MUNICIPAL  OWNERSHIP 

ers  of  the  town.  Most  of  the  cities  own  markets 
which  yield  a  large  revenue.  Torquay  breeds 
rabbits  on  a  water  preserve  and  enjoys  there- 
from a  revenue  in  reduction  of  the  rates;  the 
city  has  also  undertaken  sheep  farming.  Tun- 
bridge  Wells  grows  hops  for  sale.  Liverpool 
cultivates  beets.  Many  cities  operate  large 
sewage  farms  on  which  are  grown  supplies  for 
the  fire,  police,  and  other  departments. "  13 

"  Glasgow  owns  farms  aggregating  1571 
acres  besides  quarries  and  workshops,  forests, 
and  dwellings.  Doncaster  owns  a  coal  mine 
from  which  it  derives  an  enormous  revenue 
through  royalties."  14 

Germany — The  German  city,  according  to 
Frederic  C.  Howe,15  has  carried  socialization 
farther  than  any  city  in  the  world.  The  fol- 
lowing table,  the  figures  for  which  have  been 
taken  from  various  sources,  gives  an  idea  of  the 
degree  of  municipalization  in  Germany  in  some 
of  the  leading  industries : 

13  "Municipal  Ownership  in  Great  Britain,"  by  Frederic 
C.  Howe,  pp.  6-6. 

i*  "Collectivist  State  in  the  Making,"  by  Emil  Davies,  p. 
138. 

is  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915. 


EXTENT  AND  GROWTH  19 

Municipal  Ownership  in  Germany 

Water  supply 1,333  cities 

Gas  supply   758  cities 

Electricity 434  cities 

Street-car  lines 132  cities 

Slaughter  houses 783  cities 

Of  the  fifty  largest  cities  in  Germany  all  own 
their  gas  plants  and  all  own  their  markets; 
all  but  2  own  their  waterworks  and  baths;  all 
but  7  own  their  slaughter  houses ;  all  but  8  own 
their  electric  light  and  power  plants,  and  23  own 
their  street  car  lines.  Put  into  tabular  form 
the  case  stands  as  below: 

Fifty  Largest  German  Cities 
Number  of  Cities  Own  their 

48 Water  supply 

42 Electric  supply 

50 Gas  supply 

23 Street  car  lines 

43 Slaughter  houses 

50 Markets 

48 Baths 

From  this  it  will  appear  that  in  Germany 
municipal  ownership  is  so  common  and  so  ex- 
tensive that  it  is  almost  universal  in  many  of 
the  leading  utilities. 

4.  Municipal  Ownership  in  General 

Besides  the  above  lines  of  municipalization, 
with  which  all  are  more  or  less  familiar,  the 


20  MUNICIPAL  OWNERSHIP 

cities  of  other  countries  have  entered  almost 
every  phase  of  public  enterprise  and  social  need. 
The  following  is  only  the  briefest  review  of 
the  more  important  phases. 

Land — Freiburg  owns  77.4  per  cent,  of  its 
area;  Ulm  owns  three-fourths;  Coblenz,  Augs- 
burg, and  Stettin,  one-half;  Cologne,  Darm- 
stadt, Breslau,  Wiesbaden,  et  al.,  between  30 
and  50  per  cent.  Frankfort-on-Main  owns 
$75,000,000  worth,  or  12,397  acres,  one-half  of 
its  area;  9445  acres  are  of  forest,  from  which 
it  derives  a  profit  of  $39,000.  Klingenberg  in 
Lower  Franconia  makes  enough  from  its  land 
and  forests  to  pay  all  expenses  and  a  surplus 
besides.  Freudenstadt  in  Wiirttemberg  owns 
6000  acres  of  forest  and  32  acres  of  meadow 
land,  deriving  from  both  a  revenue  of  $35,000 
a  year.  Of  this  $26,500  pays  the  current  ex- 
penses of  the  city,  $300  is  spent  on  common 
needs,  and  $8200  is  divided  among  the  citizens. 
In  the  Grand  Duchy  of  Baden,  121  districts,  and 
in  Bavaria,  526,  were  absolutely  free  of  taxes 
by  reason  of  the  incomes  from  the  lands  owned 
by  them.16 

Diisseldorf  owns  2500  acres  of  land,  with  a 

i«"The  Collectivist  State  in  the  Making,"  Davies,  p.  24. 


EXTENT  AND  GEOWTH  21 

special  fund  of  $5,750,000  set  aside  for  the  pur- 
pose of  buying  and  selling  real  estate.17 

The  following  table  indicates  the  extent  of 
land  ownership,  both  within  and  without  the 
city,  of  a  number  of  European  cities : 18 


Total  Total 

Area  of  Amount  of 

City  Land  Owned 
By  City 

Acres  Acres 

Berlin    15,689.54  39,151.28 

Munich    21,290.24  13,597.02 

Leipsic     14,095.25  8,406.84 

Strassburg    ...   19,345.45  11,866.98 

Hanover    9,677.25  5,674.90 

Schoeneberg    ..     2,338.60  1,633.33 

Spandau    10,470.37  4,480.79 

Zurich   10,894.64  5,621.52 


Proportion  of  Total 
City  Area 


Within 

City 

Per  Cent. 
9.2 

23.7 

32.3 

33.2 

37.7 
4.2 
3.05 

26.0 


Without 

City 
Per  Cent. 

240.8 
37.8 
27.4 

281.1 
20.4 
65.1 
42.9 
25.9 


Dwellings — Many  European  cities  have  built, 
own,  and  rent  dwelling  houses. 

In  England,  Liverpool  was  one  of  the  first 
cities  to  take  up  the  matter  of  municipal  hous- 
ing. By  1906  the  city  had  built  1820  tenements 
with  4359  rooms  at  a  total  cost  for  land  and 
buildings  of  $1,783,000.  London  had  built  over 
7943  of  the  municipal  tenements  by  1905  and 
had  plans  in  hand  at  that  time  for  as  many 
more,  so  that  more  than  95,000  persons  could 


IT  "European  Cities  at  Work,"  Howe,  p.  51. 
l*  Idem.,  p.  98, 


22  MUNICIPAL  OWNERSHIP 

be  provided  for  in  the  municipal  dwellings 
when  they  were  all  completed.  The  total  cost 
amounted  to  $24,619,830.  Nearly  all  of  the 
English  cities  of  any  size  have  made  similar 
provisions  for  municipal  dwellings.  In  1907, 
Zurich,  Switzerland,  voted  $500,000  and  built 
225  apartment  houses  which  were  rented  at  cost 
to  the  people.  Later  on  288  more  are  being 
built  and  800  more  planned.  In  April,  1912, 
Paris  voted  $40,000,000  to  build  similar  houses. 
Buenos  Ayres,  South  America,  contracted  for 
the  building  of  10,000  houses.  Glasgow  and 
Manchester  rent  flats.  Sydney,  New  South 
Wales,  voted  $4,500,000  to  build  dwellings.19 

Bakeries — In  Italy  there  are  over  20  munici- 
pal bakeries,  some  of  them  the  finest  in  the 
world.  Budapest  started  one  a  few  years  ago 
and  sold  6140  tons  of  bread  at  a  profit  of 
$7250.20 

Flour  Mills — Some  Italian  towns  own  flour 
mills  in  connection  with  their  bakeries.21 

Milk — Four  German  towns  produced  milk 
from  municipally  owned  herds  and  sold  it  di- 

i»  "Collectivist  State  in  the  Making,"  Davies,  pp.  25-28. 
20  Idem.,  p.  52. 
2i/dem.,  p.  52. 


EXTENT  AND  GROWTH  23 

rect  to  the  people.  Many  other  cities  buy  and 
sell  milk.22 

Food  Supplies — One  hundred  and  forty-nine 
German  cities  have  sold  potatoes,  while  others 
handle  meat,  vegetables,  etc.23 

Farming — Munich  has  three  large  farms, 
comprising  5000  acres,  on  which  are  raised  hay, 
potatoes,  and  other  crops.24 

Slaughter  Houses — Nearly  all  of  the  German 
cities  own  and  operate  municipal  slaughter 
houses.  The  one  in  Dresden  covers  90  acres  of 
ground,  includes  68  buildings,  and  cost  $4,260,- 
000.  "In  almost  all  of  the  other  countries  of 
Europe/'  says  Howe,25  "as  well  as  in  South 
America,  Egypt,  even  in  the  Far  East,  the  pri- 
vate slaughter  house  has  been  closed.  Paris 
has  had  public  abattoirs  since  the  time  of  the 
first  Napoleon,  who  compelled  the  French  cities 
to  close  the  private  houses  and  erect  public 
ones.  In  Switzerland,  Holland,  Denmark,  Aus- 
tria-Hungary, Eussia,  and  Scandinavia  slaugh- 
tering has  been  in  public  hands  for  years. " 

Drug   Stores — The   city   of   Mayence,    Ger- 

22  "Collectivist  State  in  the  Making,"  Davies,  pp.  54-55. 

23/dem.,  pp.  54,  55. 

2*  Idem.,  p.  53. 

25  "European  Cities  at  Work,"  p.  118. 


24  MUNICIPAL  OWNERSHIP 

many,  has  two  municipal  drug  stores.  There 
is  a  large  number  in  Italy,  39  in  Eussia,  of  which 
12  are  in  Petrograd  alone.26 

Restaurants — Munich,  Ghent,  Frankfort-on- 
Main,  Hamburg,  et  aL,  own  restaurants  and  re- 
freshment rooms.27 

Brickworks — Tchernigoff,  South  Eussia,  has 
its  own  brickworks  which  it  operates  at  a  mod- 
est profit,  the  reason  for  their  operation  by  the 
municipality  having  been  the  desire  to  keep 
down  the  prices  of  the  local  manufacturers, 
which  had  become  exorbitant.28 

Funerals — Paris,  Frankfort-on-Main,  Lud- 
wigshafen,  and  other  cities  in  France  and  Ger- 
many conduct  funerals.  In  some  cities  under- 
taking is  a  municipal  monopoly.  In  Switzer- 
land every  deceased  citizen  is  given  a  free 
burial,  including  coffin,  undertaker's  services,  a 
simple  hearse,  and  one  carriage  for  the  family.29 

Crematoria — In  Prussia  the  right  of  owning 
crematoria  is  conferred  only  upon  cities,  unions 
of  parishes,  and  church  organizations.  On  the 
Continent  practically  every  crematorium  is  mu- 
se "Collectivist  State  in  the  Making,"  Davies,  pp.  73-74. 

27  Idem.,  p.  72. 

28/dem.,  p.  61. 

29  Idem.,  pp.  120-122. 


EXTENT  AND  GKOWTH  25 

nicipally  owned.  In  Germany  there  are  28 
that  are  municipally  owned.  The  charge  of 
cremation  in  these  is  from  $5  to  $12.50,  while 
under  private  ownership  in  Europe  it  is  $75 
and  upward.30 

Other  enterprises  conducted  by  European 
cities  are  savings  banks,  harbors  and  docks, 
vineyards,  nurseries,  firewood  factories,  fish- 
eries, stores,  ice  plants,  suburban  railways, 
theaters,  hotels,  and  quarries.  In  fact,  practi- 
cally the  whole  range  of  public  utilities  of  every 
sort  and  description  seems  to  have  been  covered 
somewhere  by  this  process  of  municipalization. 

Here,  then,  is  the  first  unanswerable  argu- 
ment for  municipal  ownership :  It  has  been  put 
to  the  test  of  practical  experience  throughout 
the  world  and  for  a  period  of  a  half  century,  in 
every  conceivable  form  and  under  every  possi- 
ble condition.  It  has  stood  the  test,  has  won 
its  way,  and  is  more  widespread  and  prevalent 
to-day  than  ever.  The  weight  of  the  world's 
experience  with  ever-increasing  emphasis  has 
gone  over  to  the  side  of  municipal  ownership. 

3o«Collectiviat  State  in  the  Making,"  Davies,  p.  122. 


II 

THE  CASE  AGAINST  PRIVATE  OWNERSHIP 

We  have  already  seen  that  the  experience  of 
the  world  with  municipal  ownership  constitutes 
an  argument  in  its  favor,  constantly  increasing 
in  weight  and  conclusiveness  as  the  experience 
widens  and  its  success  prevails.  Similarly  the 
experience  of  the  world  with  the  private  owner- 
ship of  municipal  utilities  constitutes  the  most 
decisive  test  of  the  value  and  practicability  of 
that  form  of  ownership  and  control. 

And  here  we  submit  the  argument  from  ex- 
perience against  private  ownership.  It  has 
been  tried  everywhere  throughout  the  world  in 
every  possible  condition.  It  is  everywhere 
found  unsatisfactory  and  is  everywhere  giving 
way  and  steadily  and  increasingly  being  re- 
placed by  municipal  ownership. 

1.  Private  Ownership  Wrong  in  Theory 

And  if  we  inquire  as  to  the  reasons  that  lie 
back  of  the  steady  advance  of  municipal  owner- 

26 


PEIVATE  OWNEKSHIP  27 

ship  and  analyze  those  reasons  to  determine 
what  has  caused  the  people  in  city  after  city,  in 
State  after  State,  and  nation  after  nation,  to 
discard  private  ownership  one  after  another  of 
their  municipal  utilities  and  substitute  munici- 
pal ownership,  we  shall  find  one  fundamental 
and  ever-present  cause,  inherent  in  the  very 
nature  of  the  situation  and  essential  to  the 
whole  system  of  private  ownership.  And  that 
one  fundamental  fact  is  this :  The  private  own- 
ership of  a  public  utility  is  fundamentally  hos- 
tile to  and  inconsistent  with  the  public  welfare. 
The  very  theory  and  purpose  of  private  owner-  ( 
ship  is  fundamentally  and  essentially  wrong 
when  viewed  from  the  standpoint  of  the  welfare 
of  all  the  people  in  the  public  good. 

Private  profit  is  the  one  essential,  fundamen- 
tal, and  determining  motive  that  operates  under 
private  ownership.  The  whole  system  is  organ- 
ized and  conducted  to  that  end.  It  is  neces- 
sarily so.  Private  profit  is  the  reason  for  the 
existence,  the  supreme  purpose  of  private  own- 
ership. If  private  profit  fails,  the  system  of 
private  ownership  fails,  and  the  whole  organiza- 
tion falls  to  the  ground. 

Every  corporation  or  company  organized  for 


28  MUNICIPAL  OWNERSHIP 

the  ownership  and  operation  of  a  public  utility 
is  organized  and  conducted  with  a  view  to  this 
one  essential  and  fundamental  purpose.  Capi- 
tal is  invested,  labor  hired,  a  board  of  directors 
selected,  officers  engaged  and  put  in  charge,  with 
the  one  sole  purpose  in  view — to  make  profit. 
If  those  in  control  do  not  make  profit,  they  are 
dismissed  and  others  put  in  charge  who  will. 

Now  this  fundamental  and  essential  purpose 
of  private  ownership  is  in  conflict  with  the  in- 
terests of  the  public.  Every  consideration  of 
the  public  welfare  and  every  concession  to  it 
cuts  in  on  private  profit.  At  every  point,  there- 
fore, there  arises  a  conflict  of  interests,  an  in- 
terminable struggle  between  the  management 
and  the  public.  The  situation  is  as  follows : 

The  Conflict  of  Interests  under  Private  Ownership 

The  public  wants  The  corporation  wants 

and  must  have  and  must  have 

Low  rates  High  fare 

Good  service  Cheap  service 

Good  labor  conditions  Low  labor  cost 

Low   capitalization    so   as  to     High  capitalization   so  as  to 

justify  low  rates  justify  high  rates 

Small  profits  or  none  Big  profits 

Profits  go  to  the  public  Profits  go  to  stockholders 

Diffusion  of  wealth  Concentration  of  wealth 
Franchises     and      ordinances      Franchises     and      ordinances 

that  protect  the  public  that  help  the  corporations 
Public  officials  who  serve  the  Public  officials  who  serve  the 

people  corporations 


PEIVATE  OWNERSHIP  29 

Such  is  the  conflict  as  long  as  private  owner- 
ship of  a  public  utility  prevails. 

The  public  wants  low  fares.  But  the  private 
corporation  must  not  allow  the  reduction  if 
there  is  any  way  to  prevent  it,  because  every  re- 
duction reduces  their  profits. 

The  public  demands  good  service.  The  cor- 
porations must  meet  this  demand  to  a  certain 
extent,  but  every  additional  dollar  spent  in  im- 
proving the  service  leaves  that  much  less  for 
profits,  hence  expenses  in  that  direction  must 
be  kept  as  low  as  possible. 

The  people  want  just  treatment  of  labor — 
good  wages,  reasonable  hours,  and  fair  condi- 
tions. And  to  this  end  the  people  almost  uni- 
versally support  the  right  of  labor  to  organize. 
But  these  things  cut  in  on  profits,  and  so  again 
the  management  is  compelled  to  resist  every 
possible  demand  and  keep  down  the  labor  cost 
to  the  lowest  possible  point. 

The  people  are  willing  to  allow  a  reasonable 
return  on  capital  actually  invested.  But  the 
corporations,  in  order  to  justify  their  rates  and 
thus  protect  their  profits,  are  constantly  over- 
capitalizing their  concerns. 

The  interests  of  the  people  demand  that  all 


30  MUNICIPAL  OWNERSHIP 

public  services  shall  be  rendered  at  cost  and 
without  any  profit,  as  in  the  postal  department. 
The  profit  in  such  services  is  simply  an  extra 
charge  levied  upon  the  people  in  the  interests  of 
a  few  stockholders.  But  such  a  cause  would  de- 
stroy private  corporations  entirely.  Hence  all 
action  in  that  direction  must  be  resisted. 

The  people  want  wealth  diffused  among  the 
people.  The  very  purpose  of  a  corporation  is 
to  draw  wealth  from  the  many  through  the 
profits  gained  and  concentrate  it  in  the  hands 
of  the  few. 

The  public  wants  franchises  and  ordinances 
that  safeguard  the  interests  of  the  people  in  all 
respects.  But  such  ordinances  always  cut  in  on 
the  profit  fund  of  the  corporations,  and  if  al- 
lowed to  go  too  far  would  absorb  it  entirely. 
Hence  again  the  corporations  must  resist. 

And,  finally,  since  the  fight  is  on,  the  people 
must  have  public  officials  who  can  be  depended 
upon,  when  elected  to  office,  to  resist  every  en- 
croachment of  the  corporations  and  see  to  it 
that  the  interests  of  the  public  are  protected  in 
every  way.  But  the  corporations  are  just  as 
vitally  concerned  to  see  that  public  officials  are 
elected  who  will  protect  their  interests.  Hence, 


PEIVATE  OWNERSHIP  31 

whether  they  will  or  no,  the  corporations  are 
and  must  be  alert  and  active  in  every  political 
campaign.  Their  very  existence  depends  upon 
it. 

And  so  the  fight  is  on.  It  goes  on  in  every 
city,  every  State,  and  every  nation  where  public 
utilities  are  privately  owned.  But  the  conflict 
is  an  unequal  one.  The  corporations  have  the 
advantage.  And  as  a  matter  of  fact  and  on  the 
whole,  the  people  lose  in  the  battle.  Under  pri- 
vate ownership  the  corporations  get  what  they 
want — the  people  do  not. 

The  whole  idea  is  wrong  in  principle,  and  this 
fact  is  now  being  recognized  more  and  more 
even  in  conservative  circles.  For  example, 
Congressman  Eobert  Grosser,  in  his  address  at 
the  conference  of  mayors  in  Philadelphia,  No- 
vember, 1914,  speaking  of  this  matter  of  regu- 
lation, declared:  "Regulation  may,  and  no 
doubt  does,  prevent  the  evils  to  which  we  have 
referred  from  going  to  the  extremes  that  other- 
wise would  be  the  case,  but  the  theory  of  regu- 
lation is  not  sound.  It  is  never  a  really  effec- 
tive method  of  procuring  the  desired  results, 
and  is  not  at  all  permanent.  It  is  an  unsound 
philosophy,  which  insists  upon  the  maintaining 


32  MUNICIPAL  OWNERSHIP. 

of  conditions  which  naturally  induce  human  na- 
ture to  go  wrong  when  it  comes  in  contact  with 
them.  If  we  make  it  to  the  material  advantage 
of  men  to  veer  from  the  path  of  justice,  the  like- 
lihood is  that  they  will  commit  injustices.  A 
man  may  be  willing  to  sit  up  all  night  for  two 
or  three  nights  to  guard  his  home  against  a 
burglar  whom  he  knows  to  be  at  large  in  the 
community,  but  after  awhile  he  will  get  tired  of 
doing  this  and  will  endeavor  to  have  the  burglar 
locked  up  instead,  so  that  he  can  go  to  bed  and 
have  a  good  night's  sleep.  So  it  is  with  the 
public  in  regard  to  private  individuals  who  are 
seeking  a  monopoly  of  the  right  to  provide  a 
certain  public  service.  The  public  may,  through 
utilities  commissions,  etc.,  watch  them  and  regu- 
late them  for  awhile,  but  ultimately  it  will  be 
found  a  much  better  way  to  quit  the  task  of 
watching  lest  some  private  individual  should 
rob  the  community  of  its  property,  and,  instead, 
arrange  to  serve  itself  and  shut  the  door  against 
those  who  may  be  tempted  to  secure  unfair  ad- 
vantage over  the  public.  "* 

i  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  pp.  287-8. 


PEIVATE  OWNERSHIP  33 

2.  The  Testimony  of  Actual  Experience 

In  theory,  therefore,  the  private  ownership  of 
municipal  utilities  is  wrong.  Turning  now  to 
the  field  of  actual  experience,  what  do  we  find? 
Exactly  what  might  be  expected.  Everywhere 
under  private  ownership  we  find:  (1)  excessive 
rates;  (2)  poor  service;  (3)  bad  labor  condi- 
tions— low  wages,  long  hours,  unsatisfactory 
treatment,  labor  disturbances,  and  strikes;  (4) 
overcapitalization  as  a  means  of  covering  up  ex- 
tortionate profits ;  (5)  enormous  private  profits ; 
(6)  concentration  of  wealth  and  power  in  the 
hands  of  the  few,  and  (7)  the  evil  influence  of 
the  corporations  in  politics. 

And  this  is  the  case  against  the  private  owner- 
ship of  municipal  utilities.  We  can  only  very 
briefly  mention  a  few  instances  on  these  points, 
referring  the  reader  to  the  sources  where  com- 
plete discussions  may  be  found. 

Excessive  Rates — That  the  rates  charged  by 
private  corporations  are  excessive  and  univer- 
sally so  is  a  matter  of  common  knowledge.  No 
better  evidence  could  be  asked  than  the  in- 
terminable fight  to  get  them  reduced.  The 
United  States  Government  has  its  Interstate 


34  MUNICIPAL  OWNERSHIP 

Commerce  Commission,  a  most  elaborate  or- 
ganization whose  chief  duty  is  to  protect  the 
people  of  the  nation  from  excessive  rates ;  prac- 
tically every  State  has  its  rate  commission; 
every  city  council  and  state  legislature  is  com- 
pelled to  give  a  considerable  portion  of  its  time 
to  the  problems  involved  in  the  struggles  of  the 
people  against  the  extortionate  rates  of  private 
corporations  owning  and  operating  public  utili- 
ties. 

The  charges  of  private  waterworks  are  found 
to  be  43  per  cent,  above  those  of  public  plants.2 
Eichard  T.  Ely  found  that  the  usual  charge 
for  water  by  private  companies  in  small  towns 
in  New  York  was  $10  per  year  for  a  household, 
while  the  usual  charge  for  a  similar  service 
when  the  plant  was  owned  by  the  city  was  only 
$4  and  the  city  made  a  profit  at  that.3 

In  1889,  private  companies  were  charging 
from  75  cents  to  $16  per  thousand  feet  for  gas. 
The  average  was  $2.16.  The  cost  was  not  over 
$1.  In  other  words,  there  was  $1.16  profit  on 
every  thousand  feet  manufactured. 

As  long  ago  as  1900,  it  was  shown  that  gas 

2  "City  for  the  People,"  by  Parsons,  p.  20. 
s  Idem.,  p.  22. 


PEIVATE  OWNERSHIP  35 

could  be  produced  and  delivered  in  Chicago  at 
65  cents  per  thousand  feet  and  a  reasonable 
profit  made  at  that.4  Chicago  has  paid  $1  per 
thousand  feet  for  years  and  is  still  paying  85 
cents.  The  Hagenah  investigation  in  1911 
showed  that  at  the  85-cent  rate  for  gas,  the  gas 
company  was  earning  a  clear  profit  of  $5,034,- 
348.69  a  year  over  and  above  every  expense, 
including  taxes,  depreciation,  and  $143,941  of 
"sundry  requirements, "  whatever  that  may  be. 
This,  the  report  showed,  allowed  an  income  of 
7  per  cent,  on  the  total  investment  and  a  sur- 
plus on  top  of  that  of  $1,424,051.69.*  In  Mil- 
waukee it  was  shown  by  the  reports  of  the  state 
rate  commission  and  on  the  basis  of  the  sworn 
statements  of  the  gas  company  itself  that  gas  is 
actually  produced  and  distributed  at  a  total  cost 
of  371/2  cents  per  thousand;  and,  furthermore, 
that  two-thirds  of  all  gas  the  company  sold  had 
been  bought  at  a  cost  of  19%  cents  per  thousand. 
The  company  charges  80  cents  per  thousand.6 

4  "City  for  the  People,"  p.  24. 

s  Investigation  of  the  People's  Gas  Light  and  Coke  Com- 
pany for  the  Chicago  Council  Committee  on  Gas,  Oil  and 
Electric  Light,  April  11,  1911. 

«  Annual  Report  of  the  Milwaukee  Gas  Light  Company  to 
the  Wisconsin  Railroad  Rate  Commission,  June  30,  1910. 


36  MUNICIPAL  OWNERSHIP 

The  average  rates  charged  for  electricity  by 
private  plants  cannot  be  far  from  twice  as  much 
as  those  charged  by  municipal  plants.  Our 
study  of  electric  light  rates  in  1914  shows  that 
the  rates  in  municipal  plants  range  from  10  cents 
per  kilowatt  hour  downward ;  in  privately  owned 
plants  from  10  upward.  We  shall  discuss 
these  rates  later.  Professor  Parsons  stated  in 
1900  that  the  private  electric  lighting  companies 
charged  the  people  for  commercial  lights  50  to 
100  per  cent,  more  than  municipal  plants  and 
their  charges  frequently  average  two,  three,  and 
sometimes  four  times  the  total  cost  of  the  serv- 
ice, operating  expenses,  interest,  taxes,  insur- 
ance, depreciation,  and  all.7 

Private  street  railways  charge  as  a  usual 
thing  a  straight  5-cent  fare.  The  facts  indicate 
that  one-half  that  amount  could  be  charged  and 
still  a  reasonable  profit  be  made. 

For  further  and  exhaustive  material  on  the 
matter  of  excessive  rates,  the  reader  should  con- 
sult Frank  Parsons',  "The  City  for  the  Peo- 
ple/' chapter  I,  pp.  19-33.  We  shall  return  to 
it  in  a  subsequent  section. 

Poor  Service — Perhaps  the  most  serious  ob- 

7  "City  for  the  People,"  p.  24. 


PEIVATE  OWNERSHIP  37 

jection  in  this  respect  is  found  in  connection 
with  the  street  car  service.  The  overcrowding 
of  street  cars  in  all  large  cities  and  especially 
at  all  rush  hours,  due  to  inadequate  service,  is 
simply  outrageous.  However,  there  are  other 
features  of  the  street-car  service  that  are  infe- 
rior— heating  is  inadequate  in  many  cities,  ven- 
tilation is  never  what  it  should  be,  and  the  clean- 
ing of  cars  is  so  neglected  as  to  become  in  many 
cases  an  actual  menace  to  the  public  health. 

Gas  is  poor  in  quality,  water  is  not  properly 
purified,  telephone  service  is  inadequate  and  in- 
convenient, and  in  all  the  utilities  there  is  lack 
of  the  proper  extension  and  improvement  of  the 
service  such  as  our  rapidly  developing  city  pop- 
ulations require. 

Bad  Labor  Conditions — As  we  have  inti- 
mated above,  the  demand  of  a  private  concern  is 
for  profits,  and  every  demand  of  labor  if  granted 
cuts  in  on  profits.  Therefore  the  inevitable 
tendency  of  private  ownership  is  to  force  down 
labor  conditions.  Wages  are  kept  as  low  as  pos- 
sible, hours  are  kept  as  long  as  possible,  and 
improved  conditions  of  labor  are  neglected.  As 
a  result  labor  is  restless  under  private  owner- 
ship. Labor  troubles  arise,  strikes  and  even 


38  MUNICIPAL  OWNERSHIP 

riots  occur  with  all  the  attendant  violence  and 
injury. 

This  has  been  one  of  the  most  constant  and 
serious  counts  against  private  ownership  every- 
where— its  ill  treatment  of  labor  and  the  result- 
ing labor  troubles.  In  every  account  of  the 
movement  for  municipal  ownership  in  Europe 
that  we  have  seen  this  has  been  given  as  one  of 
the  ever-present  and  decisive  reasons  for  the 
change.  The  municipal  ownership  of  railways 
in  Glasgow  in  1894,  which  was  really  the 
beginning  of  the  great  municipal  ownership 
movement  in  England,  came  as  a  result  of  a  long 
controversy  between  the  workers  and  the  com- 
pany, in  which  the  public  felt  that  the  company 
was  in  the  wrong.8 

In  this  country  we  have  had  our  unhappy  ex- 
periences with  the  way  private  corporations 
have  treated  their  employees.  The  strike  of  the 
employees  of  the  Big  Consolidated  street  rail- 
ways in  Cleveland,  the  Brooklyn  street  railways 
strike  in  1895,  which  required  all  of  the  police 
and  7000  soldiers  to  quell,  and  the  Philadelphia 
strike  of  the  same  year  are  a  few  of  the  more 

s  See  "European  Cities  at  Work,"  by  Frederic  C.  Howe, 
p.  334  ff. 


PRIVATE  OWNERSHIP  39 

desperate  struggles  resulting  from  the  vicious 
treatment  of  the  employees  of  these  private 
companies. 

As  illustrating  the  spirit  and  temper  of  the 
private  companies  toward  their  employees,  take 
the  matter  of  the  struggle  for  vestibules  to  pro- 
tect the  motormen  from  the  fierce  winter  winds 
and  the  inclemencies  of  the  weather.  All 
street  cars  now  have  these  vestibules.  But  they 
were  installed  only  after  many  a  long  year  of 
struggle  and  hardships  on  the  part  of  the  work- 
ers. "The  resistance  of  most  of  the  companies 
to  this  humane  requirement  till  forced  by  law 
to  adopt  it,  their  persistent  refusal  to  arbitrate 
or  consider  grievances,  their  arbitrary  dis- 
charges and  burdensome  regulations,  and  their 
efforts  to  crush  the  unions  are  strong  indica- 
tions of  their  attitude  toward  employees,  who 
are  no  more  to  them  than  so  many  cogs  in  the 
machinery  of  their  power-houses."9 

"These  strikes  that  blaze  up  now  and  then 
show  us  the  real  condition  of  things "  in  the 
industrial  world  under  private  ownership. 

Overcapitalization  and  Other  Financial 
Frauds — In  order  to  justify  their  extortions 

»  "City  for  the  People,"  by  Frank  Parsons,  p.  99. 


40  MUNICIPAL  OWNERSHIP 

and  make  it  appear  that  their  profits  are  not  so 
great  as  they  really  are,  private  corporations 
resort  to  various  devices  to  make  their  capital 
appear  greater  than  it  is.  This  is  what  is 
known  as  overcapitalization. 

"For  gas  plants  in  large  places, "  says  Par- 
sons,10 "$3  per  thousand  feet  output  is  a  fair 
capitalization,  $4  being  about  the  limit.  Yet  in 
many  States  the  average  gas  capitalization  rises 
to  $8  or  $10  per  thousand."  He  then  recounts 
cases  of  capitalization  at  $17,000,000  on  an  ac- 
tual investment  of  $4,640,000^ 1  of  a  capitaliza- 
tion of  $42  per  thousand  feet  of  output,  or  ten 
times  the  fair  capitalization.12  He  states  at 
that  time  (1901)  the  three  leading  street  rail- 
ways systems  of  Chicago  were  capitalized  at 
$130,000  a  mile  and  could  be  duplicated  for 
$60,000  a  mile ;  while  one  of  the  New  York  rail- 
ways he  found  capitalized  at  twenty-three  times 
its  real  value.13 

Delos  F.  Wilcox14  shows  that  in  1897  the 
street  railway  companies  of  Philadelphia  were 

10  "City  for  the  People,"  p.  43. 

11  P.  44. 

12  P.  45. 
is  P.  55. 

i*  "Municipal  Franchises,"  vol.  II,  p.  203. 


PEIVATE  OWNEESHIP  41 

paying  interest  on  a  capitalization  of  $21,000,- 
000  in  a  system  that  had  cost  to  construct  and 
equip  only  $6,830,425. 

This  whole  scheme  of  overcapitalization  and 
how  it  works  to  cover  up  extortion  is  well  ex- 
plained by  Edward  W.  Bemis,  who  is  a  member 
of  the  advisory  board  of  the  Valuation  Depart- 
ment of  the  Interstate  Commerce  Commission 
and  a  member  of  the  Board  of  Supervising  En- 
gineers of  the  Chicago  traction  system,  in  his 
address  at  the  mayor's  conference  above  re- 
ferred to.  He  says : 

"  Deprived  by  our  courts  of  the  right  to  earn 
on  franchise  values,  our  utilities  are  now  every- 
where making  stupendous  efforts  to  establish 
before  all  regulating  bodies  that  the  cost  of 
replacement  to-day  of  the  existing  property 
should  be  the  only  matter  considered,  to  the 
entire  exclusion  of  the  actual  investment  or  cost 
of  the  property.  Does  the  utility  occupy,  for 
example,  a  considerable  amount  of  land  which 
becomes  more  valuable  for  sale  from  year  to 
year  although  not  for  public  utility  purposes? 
Then  the  utility  demands  the  right  to  raise  the 
price  of  its  product  or  service  to  keep  pace  with 
the  increasing  value  of  its  land.  Has  the  utility 


42  MUNICIPAL  OWNERSHIP 

laid  mains  and  conduits  in  advance  of  city  pav- 
ing? It  now  demands  the  right  to  increase  its 
charges  above  what  they  would  otherwise  need 
to  be,  in  order  to  earn  on  the  cost  of  cutting 
through  the  paving,  if  an  imaginary  new  plant 
were  now  to  seek  to  duplicate  these  mains  and 
conduits  in  their  present  location.  Has  the 
price  of  labor  and  materials  risen?  Then  up 
must  go  the  charges  for  the  commodity,  even 
though  the  buildings  and  plant  were  built  before 
the  rise  in  prices.  Has  the  utility  a  large  and 
profitable  business  which  it  obtained  through 
the  growth  of  the  community  and  through  can- 
vassing and  advertising,  properly  charged  at 
the  time  to  operating  expenses  and  paid  for  by 
the  consumers  or  subscribers  I  The  utility  now 
demands  the  right  to  earn,  not  on  the  actual  cost 
properly  chargeable  to  capital  that  was  secured 
to  develop  this  income,  but  on  the  cost  of  dupli- 
cating it  to-day,  in  a  so-called  hypothetical  or 
comparative  plant. 

"The  number  of  unearned  increments  which 
can  thus  be  claimed  and,  alas! — often  secured, 
by  a  municipal  monopoly  in  a  rate  case  is  enough 
to  make  Henry  George's  ideas  of  the  unearned 


PEIVATE  OWNERSHIP  48 

increment  of  land  alone  look  small  indeed. " 15 
Furthermore,  this  evil  of  overcapitalization 
seems  to  be  increasing,  for  according  to  evidence 
submitted  by  Allan  Benson  in  the  June  number 
of  Pearson's,  1914,  the  capitalization  of  the 
street  railroads  of  the  United  States,  in  1890, 
was  $98,000  a  mile.  That  capitalization  has 
steadily  increased  until  to-day  it  is  $118,395  per  x 
mile.  "In  New  York  city,  the  Third  Avenue 
railroad  has  a  capitalization  outstanding  in  ex- 
cess of  $1,700,000  a  mile.  Some  of  the  very  best 
steam  railroads  have  been  built  for  $50,000  a 
mile  and  the  Seattle  municipal  railroad,  includ- 
ing paving  and  special  work  (not  stock  job- 
bing), cost  only  $58,000  a  mile."  16 

But  even  more  serious  than  overcapitalization 
are  the  frauds  practiced  by  the  private  corpora- 
tions in  the  manipulation  of  the  finances  of  the 
public  utilities.  These  processes  are  mysteri- 
ous and  mystifying  to  the  ordinary  individual 
and  it  is  by  no  means  easy  to  discover  and  de- 
scribe them.  Charles  Edward  Eussell  has  per- 
haps best  succeeded.  He  tells  how  Mr.  Charles 

is  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  pp.  66  and  67. 
16  "For  the  Strap  Hanger,"  Pearson's  for  June,  1914,  p.  682. 


44  MUNICIPAL  OWNEKSHIP 

T.  Yerkes,  starting  with  a  capital  of  $20,000, 
which  was  said  to  have  been  borrowed,  bought  a 
dilapidated  street  railroad  on  the  north  side  of 
Chicago  and  immediately  reorganized  and  capi- 
talized it  in  such  a  way  as  to  repay  his  $20,000 
loan;  how  he  then  "issued  more  securities, 
bought  more  roads,  milked  them  with  construc- 
tion company  and  other  devices,  and  eventually, 
piling  one  corporation  upon  another  and  one 
*  reorganization'  upon  another,  emerged  with  the 
Union  Traction  Company  of  Chicago,  embracing 
all  the  lines  of  the  city  except  those  upon  the 
south  side.  As  a  concrete  illustration  of  his 
methods  and  their  results,  I  may  say  that  the 
Union  Traction  Company  was  capitalized  at 
$120,000,000,  and  in  the  height  of  its  prosperity 
it  was  estimated  by  an  expert  examiner  to  be 
worth  as  a  going  concern  $16,000,000. " 17  By 
these  methods  Mr.  Yerkes  succeeded  in  accumu- 
lating $40,000,000  of  net  profits  out  of  the  street 
railway  system  of  Chicago  in  fifteen  years. 

Similarly  in  Milwaukee,  a  single  transaction 
in  connection  with  the  street  railways  negoti- 
ated by  Henry  C.  Payne,  afterward  Postmaster 
General  of  the  United  States,  netted  the  ma- 

17  "Lawless  Wealth/'  by  Charles  Edward  Russell,  pp.  57-58. 


PRIVATE  OWNERSHIP  45 

nipulators  $1,750,000,  for  which  the  people  of 
that  city  received  not  the  slightest  return  of  any 
kind  whatsoever.18  In  New  York  city,  accord- 
ing to  the  New  York  World,  $19,000,000  of  clear 
profits,  perhaps  loot  would  be  a  better  term 
to  use,  were  extorted  from  the  street  car 
system  by  the  manipulations  of  the  high  finan- 
ciers. 

And  these  are  but  instances  of  what  has  been 
the  usual  and  customary  thing  in  the  manipula- 
tion and  financial  buccaneering  that  has  gone  on 
in  connection  with  the  private  ownership  of  the 
great  utilities  in  our  cities. 

Enormous  Private  Profits — Much  of  the 
shortcomings  and  some  of  the  burdens  of  the 
private  operation  of  municipal  utilities  might  be 
overlooked  if  it  were  not  for  the  knowledge  that 
the  companies  as  a  rule  are  making  enormous 
profits.  In  the  private  operation  of  water 
plants  profits  have  been  shown  to  range  from 
20  to  40  per  cent,  on  the  capital  invested.  In 
Chicago,  profits  on  gas  were  15  per  cent,  and  in 
some  cases  were  as  high  as  25  and  even  30  per 
cent.  In  the  Bay  State  Gas  Company  investi- 
gation, profits  were  shown  to  be  60  per  cent.,  and 

is  "Lawless  Wealth,"  by  Charles  Edward  Russell,  pp.  79-81. 


46  MUNICIPAL  OWNERSHIP 

in  the  Cleveland  case  144  per  cent,  cash  profit 
a  year. 

In  electric  lighting,  profits  have  gone  as  high 
as  50  per  cent.  In  street  railways  the  lease 
terms  of  the  principal  lines  of  the  Philadelphia 
Traction  System  provided  for  net  returns  as 
paid  in  capital  stock  as  follows : 

Enormous  Profits  in  Street  Car  Lines19 

Annual  Dividend  on  Paid- 
Name  of  Company  in  Capital  Stock 

Continental    20.7  per  cent. 

Philadelphia    City    31.5  per  cent. 

Philadelphia  and  Gray's  Ferry    ....    16.0  per  cent. 

Ridge  Avenue    42.8  per  cent. 

Thirteen  and  Fifteenth   Streets    65.6  per  cent. 

Union    31.6  per  cent. 

West  Philadelphia 20.0  per  cent. 

In  another  place  we  have  shown  the  tremen- 
dous overcapitalization  of  the  electric  railways. 
Yet  on  the  basis  of  overcapitalization  the  United 
States  Census  finds  that  the  railways  made  a  net 
profit  of  over  10  per  cent.20  This  would  mean 
that  their  net  profit  must  have  been  not  far  from 
20  per  cent,  on  a  fair  valuation  of  their  prop- 
erty. 

Concentration  of  Wealth  and  Power — The 

19  "City  for  the  People,"  by  Frank  Parsons,  p.  36. 

20  Bulletin  No.  124,  United  States  Census,  1912,  p.  62. 


PEIVATE  OWNERSHIP  47 

logical  and  inevitable  result  of  the  foregoing 
features  of  private  ownership  of  municipal  utili- 
ties is,  first  of  all,  that  the  ownership  and  con- 
trol of  these  utilities  are  passing  rapidly  into 
fewer  and  fewer  hands ;  and,  secondly,  that  the 
wealth  and  power  derived  from  their  operations 
are  steadily  and  rapidly  concentrating  in  the 
hands  of  this  constantly  diminishing  number  of 
owners. 

Mr.  Benson,  in  his  article  in  Pearson's  Maga- 
zine for  June,  1914,  shows  that  this  '  '  concentra- 
tion of  ownership  has  already  gone  to  such  an 
extent  in  street  railway  ownership  that  twenty 
men  now  own  or  control  more  than  one-fourth 
of  all  our  electric  roads."  "Give  them  a  few 
years  more,"  he  says,  "and  all  of  the  electric 
roads,  street  and  otherwise,  will  be  controlled 
by  them."21 

The  terrific  concentration  of  wealth  and 
power  through  the  private  ownership  of  munici- 
pal public  utilities  is  well  illustrated  in  Chicago. 
Here  the  capitalization  of  the  public  utilities 
companies  totals  over  $527,000,000,  as  fol- 
lows: 

21  Pp.  68&-681. 


MUNICIPAL  OWNERSHIP 


Capitalization  of  Public  Utilities  Companies 

A'owe  of  Company  Stocks 

Chicago  Utilities  Co $40,269,000 

Chicago   Telephone   Co. ...  27,000,000 

Commonwealth  Edison  Co.  45,838,936 

People's  (ias  Light  and 

Coke  Co 38,500,000 

Chicago  Railways  Co 100,000 

Chicago  City  Railway  Co.  18,000,000 

Calumet  and  South  Chi- 
cago Ry.  Co 10,000,000 

Chicago  and  Western  Rail- 
way Co 72,000 

Chicago  and  Interurban 

Traction  Co 1,000,000 

Chicago  and  Oak  Park  Ele- 
vated Co 10,000,000 

South  Side  Elevated  Rail- 
way Co 10,231,400 

N.  W.  Elevated  Railway 

Co 9,891,500 

Met.  Elevated  Railway  Co.  16,172,000 


Bonds 

Totals 

$9,999,900 
19,004,000 
32,000,000 

$59,268,900 
46,004,000 
77,838,936 

46,762,000 
87,481,465 
28,950,000 

85,262,000 
87,581,465 
46,950,000 

4,825,000 

14,825,000 

74,000 

146,000 

1,350,000 

2,350,000 

5,077,062 

15,077,062 

10,327,000 

20,558,400 

29,552,000 
15,498,000 

39,443,500 
31,670,000 

Total 


$527,975,263 


This  is  $200,000,000  more  than  the  total  capi- 
talization of  the  public  utilities,  exclusive  of 
railroads,  in  all  the  rest  of  the  State  of  Illinois. 

And  all  this  tremendous  accumulation  of  capi- 
tal is  controlled  by  a  small  group  of  capitalists 
and  the  concentration  is  going  forward  at  a 
rapid  rate.  Speaking  of  this  powerful  concen- 
tration, Charles  E.  Merriam,  professor  of  politi- 
cal science  at  the  University  of  Chicago  and 
member  of  the  city  council,  has  said : 

"Of  the  companies  operating  in  the  city,  the 


PRIVATE  OWNERSHIP  49 

People's  Gas,  Light  and  Coke  Company  is 
owned  by  the  Commonwealth  Company,  and  the 
elevated  railroads  are  owned  by  the  Common- 
wealth Edison  Company.  Interlocking  direc- 
torates among  the  other  corporations,  as  shown 
by  recent  reports  of  the  public  service  depart- 
ment upon  my  city  council  order,  are  so  close  as 
to  keep  the  ownership  of  this  half-billion-dollar 
investment  in  a  very  few  hands.  The  process 
of  concentration  is  proceeding  very  rapidly  and 
it  is  only  a  matter  of  a  short  time  until  we  will 
be  faced  by  a  single  company  controlling  all  the 
public  utilities  of  the  city.  This  company  will 
have  larger  revenues  than  the  city  government, 
a  greater  debt  than  the  city,  employ  a  larger 
number  of  men  than  the  municipality,  and  trans- 
act a  volume  and  variety  of  business  rivaling 
that  of  the  municipal  corporation. ' '  22 

This  rapid  concentration  and  ownership  that 
has  been  going  on  in  the  field  of  municipal  utili- 
ties is  shown  in  another  way,  viz.,  in  the  rapid 
development  during  the  last  fifteen  years  of  the 
notorious  " holding  companies."  These  " hold- 
ing companies"  are  simply  devices  by  which  the 

22  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  p.  172. 


50  MUNICIPAL  OWNERSHIP 

process  of  centralizing  the  ownership  and  con- 
trol of  the  utilities  may  be  greatly  hastened 
while  at  the  same  time  more  or  less  concealing 
the  fact  from  the  public  view.  That  may  not 
be  a  scientific  definition  of  a  holding  company, 
but  I  believe  it  describes  the  essential  facts. 

Now  the  first  effect  of  the  operations  of  these 
" holding  companies"  seems  to  be  that  the  proc- 
ess of  overcapitalization  and  the  plunder  of  the 
properties  is  greatly  facilitated.  Mr.  Eussell 
has  investigated  this  matter  and  shows  how  it 
works.  In  one  case  in  New  York  City  $19,- 
500,000  mysteriously  disappeared  as  a  result 
of  one  of  the  manipulations;  in  another  case 
$51,549,490.54  had  been  taken  out  of  one  of  the 
street  car  companies  (the  Metropolitan)  by 
those  inside  through  these  devious  methods  of 
reorganization  for  which  no  return  can  be 
shown.23 

Mr.  J.  P.  Goodrich,  director  of  the  National 
City  Bank  of  Indianapolis,  in  his  address  before 
the  conference  of  mayors  in  Philadelphia,  above 
referred  to,  in  discussing  this  subject  of  the 
holding  companies,  declared  that  this  tendency 

23  "Lawless  Wealth,"  by  Charles  Edward  Russell,  chapters 
xv  and  xvi. 


PEIVATE  OWNERSHIP  51 

to  overcapitalize  the  properties  is  a  constant 
temptation  of  the  scheme.  He  cites  a  number 
of  striking  instances.  In  one  case  the  capital- 
ization is  doubled;  in  another  $1,500,000  of  fic- 
titious value  is  added.  And  he  says:  "I  am 
somewhat  familiar  with  the  effect  of  holding- 
company  ownership  and  control  in  Indiana  and 
the  general  rule  has  been  largely  to  increase 
the  volume  of  the  securities  of  the  various  prop- 
erties without  any  compensating  benefit  in  the 
way  of  increased  operating  efficiency,  reduced 
rates,  or  improved  service,  except  where  small 
cities  and  towns  have  been  connected  with  a 
central  station,  a  practice  rapidly  increasing, 
whether  the  utilities  are  controlled  by  a  holding 
company  or  operated  independently."  24 

And  besides  helping  to  facilitate  the  process 
of  overcapitalization  and  to  conceal  exploita- 
tion, the  holding  company  also,  and  by  that  very 
means,  facilitates  the  concentration  of  owner- 
ship and  control.  "  Experience  has  shown  that 
a  very  small  minority  concentrated  in  the  hands 
of  a  few  insiders  can  control  the  conduct  of  any 
large  corporation,  if  the  stock  ownership  is 

24  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  p.  331. 


52  MUNICIPAL  OWNEKSHIP 

widely  distributed.  The  larger  the  corporation 
and  the  more  widely  the  securities  are  scattered, 
the  more  easily  can  this  be  accomplished. " 52  If 
now  a  "  holding  company "  is  organized,  whose 
shares  are  also  widely  distributed,  a  still  fur- 
ther concentration  of  controlling  power  is  ac- 
complished. For  in  this  way  it  is  only  neces- 
sary for  those  who  wish  to  control  the  situation 
to  get  hold  of  a  sufficient  amount  of  the  stock 
of  the  holding  company  to  control  that  and  then 
have  the  "  holding  company "  buy  only  a  ma- 
jority of  the  stock  of  a  subsidiary  company. 
All  the  rest  of  the  stock  may  safely  be  distrib- 
uted to  the  public — and  the  more  widely  the  bet- 
ter for  the  purpose  of  those  in  control. 

Thus  the  " holding  company"  hastens  in  many 
ways  the  concentration  of  the  ownership  and 
control  of  public  utilities. 

The  extent  to  which  the  development  of  the 
holding  companies  has  gone  in  the  last  fifteen 
years  is  astounding.  In  his  address  at  the 
mayors*  conference  at  Philadelphia,  previously 
adverted  to,  Mr.  Charles  F.  Mathewson,  counsel 
for  the  Consolidated  Gas  Company  of  New 

25  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  p.  331. 


PEIVATE  OWNERSHIP  53 

York,  in  explaining  the  advantages  of  the  "hold- 
ing company, "  brought  out  the  following 
facts : 

"Of  the  total  capital,  approximately  $4,000,- 
000,000,  invested  in  the  street  railways  business 
in  this  country,  81.4  per  cent,  is  organized  into 
or  affiliated  with  holding  companies. 

"Of  the  total  $2,000,000,000  capital  in  the 
electric  light  and  power  business,  82.5  per  cent, 
is  organized  into  or  affiliated  with  holding  com- 
panies. 

"Of  the  total  $1,300,000,000  in  the  gas  busi- 
ness, over  66  per  cent,  is  organized  into  or 
affiliated  with  holding  companies. 

"So  that  taking  the  total  for  the  gas,  electric, 
and  traction  business  in  the  United  States,  ap- 
proximately $7,500,000,000,  about  $5,900,000,000 
or  78.5  per  cent,  is  now  organized  into  or  affili- 
ated with  about  140  independent  holding  com- 
panies whose  securities  are  to-day  known  and 
bought  throughout  this  country  and  Europe. "  20 

Mr.  J.  P.  Goodrich,  in  discussing  the  same 
question,  declared  that  if  the  same  rate  of  con- 
centration that  prevails  at  present  goes  on,  the 

26  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  pp.  321-322. 


54  MUNICIPAL  OWNERSHIP 

holding  companies  will  soon  have  control  of 
securities  that  will  exceed  the  total  amount  now 
outstanding. 

Thus  the  "holding  company "  seems  to  be  the 
latest  and  most  effective  scheme  devised  by 
high  finance  to  facilitate  the  plunder  of  the  peo- 
ple through  the  ownership  and  control  of  pub- 
lic utilities.  At  any  rate,  the  scheme  certainly 
does  facilitate  and  hasten  concentration  in  the 
ownership  and  control  of  public  utilities,  which 
constitutes  the  very  danger  that  everywhere 
threatens  us  under  private  ownership. 

Evil  Influences  in  Politics — The  final  count 
we  make  in  the  case  against  the  private  owner- 
ship of  public  utilities  in  the  municipality  is 
the  fact  that  it  constitutes  everywhere  an  evil 
influence  in  politics.  This  is  an  old  story,  and 
not  much  need  here  be  said  on  a  matter  so  well 
and  generally  understood. 

The  testimony  of  James  Bryce  in  his  ' l  Amer- 
ican Commonwealth,"  the  investigation  of  Lin- 
coln Steffens,  published  in  his  "Shame  of  the 
Cities,"  of  Henry  D.  Lloyd,  Charles  Edward 
Russell,  Judge  Lindsey  of  Denver,  and  many 
others,  leave  no  doubt  upon  this  point.  Every- 
where and  inevitably  the  private  corporation  is 


PEIVATE  OWNEESHIP  55 

in  politics  and  its  influence  is  invariably  bad 
and  harmful. 

Governor  Pingree  of  Michigan  told  the  story 
of  the  corruption  in  Detroit.  The  street  car 
company  "  literally  owned  the  council  body  and 
soul";  it  would  pay  $3000  for  a  member  and 
made  an  actual  offer  of  $75,000  to  buy  the  mayor 
himself.27  Pingree  himself  was  offered  a  trip 
around  the  world  by  the  agent  of  a  certain  com- 
pany if  he  would  only  not  veto  a  pending  fran- 
chise.28 In  New  York  city  as  high  as  $20,000 
an  alderman  was  paid  by  the  private  compa- 
nies in  bribes  to  secure  the  passage  of  certain 
franchises.29 

Professor  Bemis,  in  his  "  Municipal  Monopo- 
lies," relates  the  following: 

1 '  The  governor  of  one  of  our  large  States  was 
offered  the  chance  to  buy  20,000  shares  of  stock 
without  any  cash  payment  down  if  he  would 
sign  a  certain  franchise  measure.  He  was  as- 
sured and  believed  that  his  signature  would 
probably  raise  the  value  of  those  shares  from 
$1,400,000  to  $2,000,000.  Although  he  did  not 

27  "Facts  and  Opinions,"  by  Pingree,  pp.  30-31. 

28  "City  for  the  People,"  by  Parsons,  p.  71. 
2»  Idem.,  p.  71. 


56  MUNICIPAL  OWNERSHIP 

sign  the  bill,  a  similar  one  was  signed  by  his 
successor,  and  was  attended  with  an  even 
greater  rise  of  value  of  the  securities. " 30 

"I  am  satisfied  that  the  franchise  corporation 
is  more  largely  responsible  for  the  corruption 
of  the  American  city  than  any  other  agency, " 
says  Frederic  C.  Howe.31 

Newton  D.  Baker,  former  mayor  of  Cleve- 
land, Ohio,  says:  "I  have  been  for  thirteen 
years  combating  public  utilities  in  the  city  of 
Cleveland.  Every  campaign  in  those  thirteen 
years,  no  matter  how  remote  its  issues  might  be 
from  public-utilities  questions,  found  the  forces 
of  the  public  utilities  very  actively  engaged  in 
politics."  .  .  .  All  sincere  and  fair  observers 
put  their  fingers  upon  the  public-utilities  cor- 
porations in  the  city  as  at  least  the  greatest 
contributing  cause  of  the  corruption  of  the 
American  city.  .  .  .  Practically  every  state 
legislature  in  this  country  and  practically  every 
city  council  in  this  country  was  either  corrupted 
or  under  very  grave  suspicion. ' ' 32 

sop.  657. 

si  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  p.  207. 
32 /dem.,  pp.  193,  189  and  190. 


PEIVATE  OWNERSHIP  57 

Speaking  of  the  operations  of  Mr.  Yerkes  in 
Chicago,  Carter  H.  Harrison,  then  mayor  of 
Chicago  and  acting  as  presiding  officer  of  the 
conference  of  mayors  at  Philadelphia,  said : 

"Philadelphia  was  considerate  enough  at  one 
time  to  loan  to  Chicago  Charles  T.  Yerkes,  until 
we  made  him  pack  his  baggage  and  move  to  Lon- 
don. I  have  seen  him  seated  in  the  great  cor- 
ridor outside  the  doors  of  the  House  of  Repre- 
sentatives of  the  State  of  Illinois  sending  for 
his  lieutenants,  leaders  of  both  parties  among 
the  legislators,  giving  his  orders,  outlining  his 
strategy  like  the  veriest  war  lord  on  the  field 
of  battle.  I  have  heard  state  legislators  in  pub- 
lic places  recount  as  the  joke  of  all  jokes  how 
a  country  representative  accepted  $300  for  his 
vote  when  $3000  was  his  allotted  portion. 
These  were  the  days  of  rough  and  raw  work,  yet 
these  days  are  removed  from  the  present  by  the 
brief  space  of  sixteen  years  only."  83 

Even  as  conservative  a  writer  as  Professor 
Richard  T.  Ely  declares  that  the  corporations 
are  as  a  general  rule  in  politics,  and  that  in  the 
very  nature  of  the  case  it  must  be  so.  And  he 

ss  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  p.  56. 


58  MUNICIPAL  OWNERSHIP 

very  frankly  illustrates  the  situation  by  a  per- 
sonal allusion.  "When  the  writer,"  he  said, 
"had  invested  what  was  for  him  a  considerable 
sum  in  gas  stock,  he  tried  to  answer  for  him- 
self this  question:  As  an  owner  of  gas  stock, 
exactly  what  kind  of  a  municipal  government 
do  I  want?  The  government  of  the  city  in 
which  was  located  the  gasworks  in  which  the 
writer  was  interested  was  a  stench  in  the  nos- 
trils of  reformers  throughout  the  country;  but 
he  ceuld  not  persuade  himself  that  as  an  owner 
of  gas  stock  any  very  considerable  change  was 
for  his  interest.  The  city  government,  as  it 
then  was,  was  a  'safe'  one,  and  the  result  of  a 
change  could  not  be  foretold."34  In  this  arti- 
cle Professor  Ely  recalls  the  case  of  Jacob 
Sharp,  who  secured  a  franchise  in  New  York 
city  through  wholesale  corruption  and  was  sent 
to  the  penitentiary.  And  in  this  connection 
mention  might  be  made  of  similar  experiences 
in  San  Francisco  at  the  other  extreme  of  the 
country. 
So  the  statement  made  by  Lincoln  Steffens  in 

3*  "Municipal  Ownership  of  Natural  Monopolies  in  Worth 
American  Review,  March,  1901,  quoted  in  "Debaters'  Hand- 
book on  Municipal  Ownership,"  p.  101. 


PKIVATE  OWNERSHIP  59 

his  "The  Struggle  for  Self-Government'1  is 
none  too  strong.  "Our  political  corruption  is 
a  system,  a  regularly  established  custom  of  the 
country,  by  which  our  political  leaders  are  hired 
by  bribery,  by  the  license  to  loot  and  by  quiet 
moral  support  to  conduct  the  government  of  the 
city,  State  and  nation,  not  for  the  common  good 
but  for  the  special  interests  of  private  busi- 
ness." 

This  then  is  the  case  against  private  owner- 
ship: First  of  all,  it  is  wrong  in  theory  and 
purpose.  Secondly,  it  works  badly  in  practice. 
Bates  are  excessive,  service  is  poor,  labor  con- 
ditions are  unsatisfactory,  the  companies  are 
overcapitalized,  private  profits  are  enormous,  it 
is  swiftly  concentrating  the  ownership  and 
thereby  the  wealth  and  power  that  result  there- 
from into  the  hands  of  a  few,  and  meanwhile  it 
is  corrupting  and  vitiating  our  civic  life.  And 
every  count  is  sustained  by  unquestionable  evi- 
dence and  the  practical  experience  of  cities  all 
over  the  world  and  for  a  period  of  nearly  half 
a  century. 


HI 

THE  FAILURE  OF  REGULATION 

The  private  ownership  and  operation  of  pub- 
lic utilities  having  been  proved  so  universally 
unsatisfactory,  it  would  seem  that  municipal 
ownership  would  follow  as  a  matter  of  course. 
But  the  friends  of  private  ownership,  and  espe- 
cially the  corporations  themselves,  have  another 
alternative — regulation. 

These  people  argue  as  follows:  Even  if  we 
concede  that  the  system  of  private  ownership 
has  not  always  given  us  the  best  of  service  and 
results  that  are  entirely  satisfactory,  still  we 
need  not  on  that  account  overthrow  the  whole 
system.  All  that  is  needed  is  a  proper  system 
of  regulation  and  control  by  the  public  authori- 
ties. Therefore  let  us  have  a  strong  commis- 
sion in  each  city,  or  better,  in  each  State,  whose 
duty  it  shall  be  to  have  charge  over  all  public 
utilities,  hear  both  sides  in  every  case  of  com- 
plaint, and  render  decisions  as  to  the  proper 
rates,  service,  etc. 

60 


THE  FAILUEE  OF  EEGULATION    61 

This  is  the  famous  regulation  remedy.  Let 
us  examine  its  claims. 

And  let  us  note  first  of  all  that  this  scheme 
of  regulation  encounters  exactly  the  same  fun- 
damental difficulty  that  the  plan  of  private  own- 
ership does,  viz.,  the  conflict  of  interest  between 
the  few  who  own  the  utilities  and  the  public  that 
must  use  them.  So  that  the  same  interminable 
struggle,  the  same  inevitable  fight  between  the 
people  who  want  home  rule,  better  service,  and 
better  treatment  of  labor  and  the  rest,  and  the 
corporations  who  do  not  want  and  cannot  afford 
to  allow  these  things,  must  go  on  just  the  same. 
Only  there  will  be  this  difference :  there  is  one 
more  element,  the  commission  introduced  to 
complicate  matters  and  therefore  to  lessen  the 
likelihood  of  a  speedy  and  fair  settlement  in  the 
interests  of  the  people. 

Also  in  passing  we  may  remark  that  the  sus- 
picion which  some  of  us  had  from  the  beginning 
that  the  whole  scheme  would  help  the  corpora- 
tions in  their  careers  of  plunder  rather  than 
protect  the  people  seems  now  to  have  been 
growing  into  a  settled  conviction  in  every  di- 
rection. We  read,  for  example,  the  following 
from  Delos  F.  Wilcox,  in  his  address  at  the  con- 


62  MUNICIPAL  OWNERSHIP 

ference  of  American  mayors  held  at  Philadel- 
phia, November  12-14,  1914:  "The  principle 
of  state  regulation  by  permanent  commissions 
was  put  forward  in  this  country  a  few  years  ago 
as  a  statesmanlike  method  of  protecting  the  peo- 
ple from  the  exactions  of  the  public  service  cor- 
porations, while  at  the  same  time  giving  the 
corporations  a  fair  deal.  We  now  find  that  all 
the  corporations  have  been  converted  to  the  idea 
of  regulation.  They  not  only  welcome  it  but 
insist  upon  having  it.  They  are  so  enthusiastic 
over  it  that  they  help  write  the  laws  and  appoint 
the  commissioners."  1  And  Edward  W.  Bemis, 
at  the  same  conference,  pointed  out  that  the 
inauguration  of  the  regulation  movement  was 
favorable  to  the  corporations  inasmuch  as  it 
operated  to  check  the  home  rule  movement  for 
cities  and  especially  to  sidetrack  the  municipal 
ownership  movement.2  Daniel  W.  Hoan,  now 
mayor  of  Milwaukee,  who  as  its  city  attorney 
represented  it  in  all  its  legal  battles  with 
the  Wisconsin  Eailroad  Bate  Commission  for 
years  in  the  struggle  for  relief  for  the  people 

1  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  p.  8. 

2  Idem.,  p.  64. 


THE  FAILURE  OF  REGULATION     63 

under  the  system  of  regulation  in  Wisconsin, 
declares:  "Regulation  legislation  solves  the 
public  service  corporation  problem  completely 
in  favor  of  the  capitalist.  I  venture  the  state- 
ment, without  fear  of  contradiction,  that  no 
shrewder  piece  of  political  humbuggery  and 
downright  fraud  has  ever  been  placed  upon  the 
statute  books.  It  is  supposed  to  be  legislation 
for  the  people.  In  fact,  it  is  legislation  for  the 
moneyed  oligarchy."3 

Coming  now  a  little  closer  to  this  question  of 
regulation,  we  find  that  as  a  matter  of  fact  regu- 
lation has  been  tried  in  foreign  countries,  found 
a  failure,  and  given  up  years  ago.  We  find, 
moreover,  that  it  has  been  tried  in  this  country 
in  one  form  or  another  for  over  thirty-five 
years,  and  has  never  yet  succeeded  in  solving 
any  one  of  the  problems  involved  in  the  opera- 
tion of  public  utilities. 

1.  The  Failure  of  Regulation  in  Foreign 
Countries 

Long  before  the  idea  of  "  regulation "  was 
brought  forward  by  our  American  reformers  as 
the  "statesmanlike  method  of  protecting  our 

3  'The  Failure  of  Regulation,"  by  Daniel  W.  Hoan,  p.  62. 


64  MUNICIPAL  OWNEESHIP 

people  from  the  exactions  of  the  public  service 
corporations, "  it  had  been  tried  by  the  people 
in  foreign  countries.  They  found  out  that  regu- 
lation was  not  a  protection  to  the  people  and 
that  it  was  no  solution  of  the  problem  involved. 
And  they  proceeded  at  once  to  the  real  solution 
which  they  have  found  everywhere  in  public 
ownership. 

England,  for  example,  started  out  in  1842  try- 
ing to  regulate  her  railroads.  Certain  super- 
visory and  regulative  powers  were  conferred 
upon  the  board  of  trade.  From  that  time  for- 
ward, England  has  tried  every  possible  form  of 
regulation  and  after  more  than  seventy  years, 
the  situation  is  just  as  unsatisfactory  as  ever, 
even  more  so.4  In  fact,  matters  were  so  bad  in 
this  respect  that  at  the  outbreak  of  the  present 
war  England  finally  applied  the  real  remedy 
for  the  railway  problem  by  nationalizing  the 
railways. 

In  Switzerland  for  nearly  a  half  century  regu- 
lation was  tried.  First  it  was  tried  by  the  can- 
tons which  correspond  to  our  States.  It  did  not 
work.  So  in  1872  the  Federal  Government  took 
it  up  and  for  twenty-five  years  tried  that  form 

*  See  "American  Railway  Problems,"  by  Vrooman,  p.  67. 


THE  FAILUEE  OF  KEGULATION     65 

of  regulation.  Federal  regulation  may  have 
been  some  better  than  state  regulation,  but  it 
did  not  satisfy  the  Swiss  people.  In  1897  Swit- 
zerland nationalized  the  roads. 

Italy  tried  both  private  and  public  ownership 
and  operation  of  railroads.  She  also  tried  a 
combination  of  public  and  private  ownership, 
owning  some  of  the  roads  and  leasing  them  to 
private  companies.  In  all  cases  "regulation" 
was  the  method  relied  upon  to  "protect"  the 
people.  The  system  proved  entirely  unsatis- 
factory and  in  1905  Italy  nationalized  her 
roads. 

France,  Germany — in  fact,  practically  all  of 
the  European  nations,  tried  regulation  as  a 
means  of  protecting  themselves  from  the  evils 
of  private  ownership  and  one  after  the  other  has 
given  it  up  as  a  bad  job  and  gone  over  to  public 
ownership  as  the  only  solution.5 

And  these  countries,  having  tried  the  theory 
of  regulation  on  their  railroads  and  finding  that 
it  did  not  work,  were  not  so  foolish  as  to  try  to 
apply  the  system  that  has  proved  unsatisfactory 
to  the  whole  of  their  public  utility  problems. 
They  proceeded  directly  to  municipal  ownership 

5  See  "American  Railway  Problems,"  by  Vrooman. 


66  MUNICIPAL  OWNERSHIP 

as  the  solution  of  the  problem  locally.    We  have 
shown  this  in  a  previous  section. 

2.  The  Failure  of  Regulation  in  the  United 
States 

Since  1878,  or  for  over  thirty-five  years  now, 
the  United  States  Government  has  been  trying 
to  solve  its  railroad  problems  by  this  method  of 
regulation.  It  would  seem  unnecessary  to  ar- 
gue that  our  problem  is  not  solved,  especially  in 
view  of  the  recent  controversies  through  which 
the  roads  have  again  succeeded  in  raising  their 
rates,  and  the  still  more  recent  labor  troubles 
that  threatened  to  precipitate  a  general  strike. 
This  method  of  federal  regulation  has  proved 
so  unsatisfactory  that  every  State  has  felt  called 
upon  to  appoint  and  maintain  a  commission  to 
"protect  itself  from  the  corporations." 

And  on  top  of  all  this,  both  the  state  legis- 
latures and  the  courts  have  been  called  into 
action  as  allies  in  this  merry  war  of  regulation 
— and  still  the  plan  does  not  work  out  satisfac- 
torily. 

About  ten  years  ago,  in  spite  of  the  lesson 
from  foreign  lands  and  in  spite  of  the  unsatis- 
factory working  of  the  theory  in  the  case  of  our 


THE  FAILUEE  OF  EEGULATION     67 

interstate  utilities,  the  idea  of  extending  the 
theory  of  regulation  so  as  to  include  all  utili- 
ties, municipal  as  well  as  state  and  national, 
came  into  vogue.  New  York  State  adopted  the 
idea,  and  created  a  state  commission  for  this 
purpose.  Wisconsin  followed  the  example. 
Other  States  have  followed,  until  we  now  have 
twenty-six  States  and  the  District  of  Columbia, 
with  commissions  for  the  regulation  of  public 
utilities. 

So  we  have  had  this  theory  of  regulation  on 
trial  now  for  a  great  many  years  and  in  every 
possible  form. 

And  what  are  the  results  ? 

Not  a  single  problem  has  been  solved ;  not  a 
single  evil  of  private  ownership  has  been  re- 
moved. Kates  have  kept  on  going  up  as  be- 
fore ;  labor  has  been  just  as  badly  treated ;  the 
dividends  of  the  public  utility  corporations  have 
gone  right  on  piling  up;  the  influence  of  the 
corporations  in  politics  continues;  the  concen- 
tration of  wealth  goes  on  at  the  same  rapid  rate ; 
service  is  poor ;  labor  troubles  abound,  and  mu- 
nicipal ownership,  which  is  the  only  real  solu- 
tion, has  been  delayed  in  many  cases  for  years 
to  come.  In  fact,  there  is  every  reason  to  be- 


68  MUNICIPAL  OWNERSHIP 

lieve  that,  from  the  standpoint  of  the  general 
welfare,  things  are  even  worse  after  our  years 
of  experience  with  regulation  than  they  were 
before. 

Evidence  of  these  facts  is  now  being  accumu- 
lated in  every  direction.  In  Minnesota,  in  Mas- 
sachusetts, in  Wisconsin,  and  in  the  State  of 
Washington  separate  and  independent  investi- 
gations have  been  made  of  the  matter  and  all 
have  come  to  the  same  conclusion. 

In  Minnesota  a  nonpartisan  Home  Eule 
League,  organized  by  citizens  of  that  State,  has 
made  a  "comprehensive  investigation  of  the  re- 
sults of  state  regulation  in  the  United  States." 
They  made  a  special  study  of  the  operation  of 
the  law  in  the  State  of  Wisconsin,  because,  as 
they  say,  "it  is  in  that  State  that  the  system 
has  been  given  its  longest  and  fairest  trial." 
The  results  of  their  investigation  are  published 
in  a  pamphlet,  i 'Regulation  of  Public  Utilities 
in  Wisconsin,"  and  it  confirms  every  contention 
made  above  as  to  the  utter  futility  and  failure 
of  regulation. 

This  investigation  covers  134  cases  and  in- 
cludes all  of  the  local  public-utility  cases  involv- 
ing rate  and  service  issues  from  the  time  that 


THE  FAILUEE  OF  EEGULATION     69 

the  utility  regulation  law  went  into  effect  in 
1907  down  to  March,  1912.  The  league  sum- 
marizes the  results  and  conclusions  of  this  re- 
port as  follows: 

The  commission  has  not  given  relief  to  the  public 
in  the  way  of  lower  rates  and  better  service. 

It  has  shown  a  strong  leaning  toward  the  interests 
of  the  utilities  as  against  public  interest. 

It  has  been  an  obstacle  in  the  way  of  municipal 
ownership. 

It  has  compelled  the  cities  in  many  cases  to  go  to 
large  expense  to  defend  their  interests. 

It  has  used  the  indeterminate  permit  to  protect  in- 
efficient private  electric  utilities  in  their  local  mo- 
nopoly. 

It  has  discouraged  the  cause  of  conservation  of  nat- 
ural resources. 

It  has  failed  to  eliminate  the  public  utilities  from 
local  politics. 

It  has  discriminated  heavily  against  the  general 
public  and  in  favor  of  the  privileged  few.6 

The  results  of  this  study  of  the  specific  cases 
that  went  before  the  regulating  commission  in 
Wisconsin  may  be  presented  in  the  following 
table: 

e  "Regulation  of  Public  Utilities  in  Wisconsin,"  Minnesota 
Home  Rule  League,  720  New  York  Life  Building,  Minneapo- 
lis. 


70  MUNICIPAL  OWNEBSHIP. 

How  Regulation  Works  in  Wisconsin 

What  the  People  Got  What  the  Corporations  Got 
Successful  in   7  per  cent,  of  Successful  in  96  per  cent,  of 
cases   brought   before   com-  cases   brought   before   com- 
mission mission 

Reduction  of  rates  in  3  cases.  Increase  in  rates  in  52  cases 

"Relief"  in  better  service  in  "Relief"  from  improved  serv- 

5  out  of  10  cases  ice  in  9  out  of  10  cases 

Not    a    single    Deduction    in  Increased  telephone  rates   in 

telephone  rates  33  out  of  34  cases 

Our  conclusions  are  further  supported  by  a 
careful  and  exhaustive  study  of  the  subject  made 
by  Mr.  Hoan,  now  mayor  of  Milwaukee.  The 
results  of  Mr.  Hoan's  efforts  to  get  some  relief 
for  the  people  of  the  city  of  Milwaukee  and 
the  conclusions  he  reached  from  his  experience 
and  study  of  the  subject  of  regulation,  are  set 
forth  in  a  pamphlet,  "The  Failure  of  Eegula- 
tion."  From  these  and  other  sources  at  our 
command  we  draw  our  conclusions  as  to  the  fu- 
tility of  regulation  as  a  method  of  solving  the 
public  utility  problem  for  the  city. 

Under  Regulation  Rates  Have  Been  Increased 
Rather  Than  Decreased — This  is  notoriously 
the  case  on  the  steam  railroads.7  But  it  is  just 
as  true  of  municipal  utilities.  Hoan,  in  his 

7  See  author's  pamphlet  on  "Public  Ownership  of  Rail- 
ways," p.  21,  which,  by  the  way,  was  written  before  the  recent 
increase  in  rates  was  granted  by  the  Interstate  Commerce 
Commission. 


THE  FAILURE  OF  EEGULATION    71 

pamphlet  above  referred  to,  cites  the  case  of 
Manitowoc,  Wisconsin,  where  the  state  commis- 
sion actually  raised  the  rates  charged  for  gas 
from  $1  per  thousand  to  $1.25  per  thousand. 
And  this  is  not  an  isolated  case.  There  have 
been  many  others.  Up  to  1912  the  commission 
had  ordered  rates  raised  for  seven  private 
water,  gas,  electric,  and  street  railways,  and 
twenty  private  telephone  companies. 

That  is  the  way  "  regulation "  works  out  in 
Wisconsin.  Professor  J.  Allen  Smith  of  the 
University  of  Washington,8  tells  the  story  of  a 
fight  with  the  theory  of  regulation  in  that  State 
with  results  about  the  same.  In  Massachusetts, 
the  city  attorney  of  Haverhill  declared  that 
after  twelve  years  of  regulation  and  an  intermi- 
nable fight  on  the  part  of  the  city  all  that  time, 
the  price  of  gas  was  15  per  cent,  higher  than 
when  the  struggle  began.9 

Regulation  Has  Effectually  Blocked  Munici- 
pal Ownership — We  have  already  referred  to 
Mr.  BeimV  testimony  to  this  effect.10  Mr. 
Hoan  shows  that  the  Wisconsin  law,  while  it 

s  National   Municipal  Review,  January,   1914,  pp.  41-43. 
»  "Failure  of  Regulation,"  by  Daniel  W.  Hoan,  pp.  52-53. 
10  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  pp.  63-64. 


78  MUNICIPAL  OWNEESHIP 

contained  provisions  that  ostensibly  favored 
municipal  ownership,  was  so  loaded  that  it  fa- 
vored private  ownership  and  actually  operated 
to  prevent  public  ownership.11  He  cites  the 
specific  instances  of  Chilton,  La  Crosse,  and 
Kenosha  in  Wisconsin,  showing  just  how  the 
law  works  out. 

Under  Regulation  the  Incomes  and  Dividends 
of  the  Private  Corporations  Have  Increased — 
It  has  been  shown  that  the  rate  of  the  dividends 
of  the  railroads  has  increased  from  5%  per  cent, 
to  7%  per  cent,  in  ten  years ;  that  the  average 
freight  rates  have  increased,  and  that  the  total 
dividends  have  increased.12  Clifford  Thome 
showed  before  the  Interstate  Commerce  Com- 
mission in  its  hearings  in  the  summer  of  1914 
that  the  net  revenues,  rate  of  dividends,  and 
total  net  earnings  were  greater  in  the  years 
1910-13,  inclusive,  than  ever  before.13 

Eegulation  of  municipal  utilities  has  worked 
the  same  way. 

By  its  order  in  fixing  the  gas  rates  in  the 
Milwaukee  Gas  Light  Company  of  approxi- 

11  "Failure  of  Regulation,"  by  Daniel  W.  Hoan,  pp.  20-27. 

12  "Public  Ownership  of  Railways,"  by  Carl  D.  Thompson, 
pp.  21-23. 

is  Pearson's  Magazine,  July,  1914. 


THE  FAILUEE  OF  EEGULATION     73 

mately  10  per  cent,  per  annum,  case,  the  rail- 
road commission  allowed  a  profit  to  be  made  on 
the  value  of  the  plant,  not  to  speak  of  a  depre- 
ciation fund  approaching  2  per  cent  The 
United  States  Supreme  Court  has  decided  that  6 
per  cent,  net  profit  is  sufficient  return  on  the  in- 
vestment of  a  gas  plant  in  a  large  city.  The 
Wisconsin  commission,  however,  thought  it 
would  be  more  "progressive"  to  allow  10  per 
cent. 

The  application  of  the  ruling  in  this  case  en- 
ables the  corporation  to  draw  a  dividend  of  16 
per  cent,  and  to  give  it  a  clear  profit  of  $1,- 
000,000  a  year. 

Mr.  Hoan  shows  that  under  the  "Wisconsin 
idea"  of  regulation  the  earnings  of  private 
corporations  operating  public  utilities  in  the 
State  were  as  follows :  "The  North  Milwaukee 
Light  and  Power  Company,  $1982.29,  or  15  per 
cent. ;  the  Burlington  Electric  Light  and  Power 
Company,  $6565.62,  or  30  per  cent. ;  the  Water- 
town  Gas  and  Electric  Company,  $18,216.45,  or 
20  per  cent.;  the  Wisconsin  Gas  and  Electric 
Company,  $94,192.52,  or  14  per  cent. ;  Milwaukee 
Light,  Heat  and  Traction  Company,  $538,824.29, 
or  43  per  cent. ;  and  the  Milwaukee  Electric  Bail- 


74  MUNICIPAL  OWNERSHIP 

way  and  Light  Company,  $828,277.54,  or  14  per 
cent. "  14  In  Milwaukee,  where  the  most  strenu- 
ous efforts  were  made  to  make  the  system  effec- 
tive, the  people  are  "  paying  to  the  stock  and 
bondholders  of  the  Milwaukee  Electric  Eailway 
and  Light  Company  $1,402,237.54  dividends  and 
interest  on  a  plant  worth  twelve  million  dollars. 
This  would  be  a  12  per  cent,  return  on  the  valu- 
ation. It  also  appears  from  this  that  the  com- 
pany under  Wisconsin  regulation  is  exacting 
from  each  man,  woman,  and  child  in  Milwaukee 
(400,000)  about  $3.50  in  interest  and  dividends 
alone,  after  paying  all  its  expenses,  in  a  single 
year."  15 

In  Haverhill,  Massachusetts,  the  dividends  of 
the  gas  companies  steadily  increased  from  10 
per  cent,  in  1896,  to  30  per  cent,  in  1900.16 

Regulation  Favors  the  Large  Consumers — 
The  city  of  Milwaukee  owns  its  water  system. 
It  charges  a  uniform  rate  for  water,  with  no 
special  rate  for  the  Big  Fellow. 

In  May,  1909,  twenty-five  big  manufacturers 
filed  a  petition  with  the  commission  asking  for 

14  "Failure  of  Regulation,"  by  Daniel  W.  Hoan,  p.  65. 
is /dew.,  pp.  66-67. 
IB  Idem.,  p.  53. 


THE  FAILUEE  OF  KEGULATION     75 

special  rates.  In  October,  1913,  the  commission 
issued  a  tentative  report,  providing  that  the  old 
system  of  uniform  water  rates  to  all  should  be 
rescinded  and  new  rates  substituted  therefor, 
favoring  all  those  who  used  over  one  thousand 
gallons  of  water  every  three  months.  Thus 
again,  the  fellow  who  could  buy  the  largest 
amount  of  the  product,  to  be  used  in  most  in- 
stances as  a  raw  material  for  profits,  was  to  be 
benefited  at  the  expense  of  the  small  consumers, 
who  consumed  solely  for  use. 

And  this  also  is  a  typical  case. 

It  Helps  to  Keep  Labor  in  Subjection — In 
the  city  of  Superior,  Wisconsin,  in  1912,  the 
street  railway  company  had  been  dismissing  its 
employees  for  joining  a  union,  etc.  A  strike 
was  called.  The  men  offered  to  go  back  to  work 
upon  recognition  by  the  company  of  their  right 
to  organize.  The  company  refused  to  grant  the 
demand.  The  service  was  at  a  standstill.  An 
action  was  instituted  in  court  to  compel  the  com- 
pany to  supply  service.  Success  in  this  move 
would  have  meant  victory  for  the  men.  The 
company  appealed  to  the  regulation  law  which 
provides  that  all  questions  of  adequate  service 
must  be  determined  by  the  railroad  commission 


76  MUNICIPAL  OWNERSHIP 

before  the  same  could  be  taken  into  the  courts. 
The  delay  of  the  courts  was  bad  enough,  but  to 
think  of  first  going  to  the  commission  was  de- 
spairing. The  lower  court  refused  to  hold  that 
the  law  could  be  used  in  such  cases.  But  the 
company  appealed  to  the  Supreme  Court,  where 
its  contention  was  sustained. 

Endless  Delays — In  the  very  nature  of  the 
case,  the  system  of  regulation  breaks  down. 
When  we  consider  the  hundreds  and  thousands 
of  public  utility  corporations  operating  in  the 
United  States,  with  all  the  interminable  and 
complicated  problems  involved,  the  idea  that 
any  commission  of  men,  whether  state,  national 
or  municipal,  can  successfully  control  them, 
seems  quite  unpractical. 

In  the  State  of  Wisconsin,  for  example,  the 
rate  commission  is  trying  to  regulate  43  rail- 
roads, 6  express  companies,  several  telegraph 
companies,  all  of  which  are  state  wide.  And 
the  same  commission — three  men  and  a  few  ex- 
pert assistants — are  trying  to  regulate,  in  ad- 
dition to  all  the  state  utilities,  28  municipal 
street  railway  companies,  244  electric  utilities, 
54  gas  companies,  156  water  companies,  666  tele- 


THE  FAILURE  OF  REGULATION     77 

phone  companies,  and  16  heating  plants — a  total 
of  1164  public  utilities.17 

The  mere  listing  of  these  utilities  ought  to 
show  the  utter  impracticability  of  the  plan. 
The  endless  task  means  endless  delays  that 
make  the  system  impossible. 

We  shall  cite  one  instance  of  the  way  it  works 
out  in  practice. 

On  July  11,  1907,  the  city  of  Milwaukee  ap- 
pealed to  the  commission  for  relief  from  intoler- 
able conditions  and  a  reduction  of  fares  on  the 
street  car  lines.  It  took  five  years,  or  until 
September,  1912,  to  get  a  decision  out  of  the 
commission.  The  decision  gave  no  relief  as  to 
the  service  and  only  one  extra  fare  for  a  dollar. 
And  even  then  the  people  did  not  get  it. 

The  regulation  law  provides  that  the  com- 
pany if  dissatisfied  with  any  decision  of  the 
commission  can  appeal  to  the  courts.  The  com- 
pany was  dissatisfied.  It  appealed.  Another 
month's  delay.  The  court,  however,  sustained 
the  order.  The  company  appealed  again.  The 
judgment  of  the  court  was  stayed.  Several 
more  months'  delay.  The  Supreme  Court  of 

IT  "Failure  of  Regulation,"  by  Daniel  W.  Hoan,  pp.  75-76. 


78  MUNICIPAL  OWNERSHIP 

the  State  announced  its  decision  on  May  31, 
1913.  It  again  sustained  the  order  of  the  com- 
mission and  ordered  the  one  little  extra  fare  for 
a  dollar  given  to  the  people  of  Milwaukee. 
The  company  secured  a  "writ  of  error"  to  the 
United  States  Supreme  Court.  And  there  at 
present,  seven  years  and  a  half  after  the  case 
was  first  brought  to  the  commission,  the  matter 
rests. 

Eight  years,  or  more,  to  get  one  case  through 
the  mill  of  this  great  regulation  process  and  se- 
cure for  a  city  of  400,000  population  one  little 
4-cent  street  car  ticket,  and  the  end  is  not  yet. 

At  every  essential  point,  therefore,  the 
scheme  of  regulation  breaks  down.  It  fails  to 
accomplish  what  the  interests  of  the  people  de- 
mand shall  be  done. 


IV 


THE  ADVANTAGES  OF  MUNICIPAL 
OWNERSHIP 

Private  ownership  and  operation  of  munici- 
pal utilities  has  proved  unsatisfactory.  Kegu- 
lation  does  not  meet  the  difficulties.  But  one 
thing  remains — municipal  ownership. 

The  experience  of  hundreds  and  even  thou- 
sands of  cities  in  this  and  other  countries  is  now 
before  us  so  that  we  may  judge  of  its  success. 
And  we  propose  to  present  briefly  the  chief  ad- 
vantages that  have  been  found  to  follow  the 
establishment  of  municipal  ownership. 

But  before  presenting  the  specific  advantages 
of  municipal  ownership,  we  wish  to  point  out 
that  the  idea  is  sound  in  theory  and  purpose, 
thus  meeting  the  very  first  difficulty  everywhere 
encountered  under  private  ownership.  As  we 
have  pointed  out  before,  the  private  ownership 
of  a  public  utility  involves  an  inherent  incon- 
sistency, an  inevitable  conflict  of  interests  be- 

79 


80  MUNICIPAL  OWNERSHIP 

tween  those  who  own  and  those  who  use.  The 
owners  want  profit,  the  people  want  service ;  the 
owners  want  dividends  and  profits,  the  people 
want  fair  wages  and  good  labor  conditions  and 
reasonable  rates.  Hence  the  inevitable  conflict 
of  interests. 

Now  immediately  upon  the  establishment  of 
municipal  ownership  this  conflict  of  interests 
\  disappears.  The  users  then  become  the  owners 
and  a  unity  of  interest  is  established.  Thus 
municipal  ownership  gets  rid  at  once  of  the 
one  great  difficulty,  the  inevitable  and  never- 
ending  conflict  that  prevails  under  private  own- 
ership. 

Now  as  to  the  specific  advantages  of  munici- 
pal ownership. 

1.  Advantages  in  the  Organization  and 
Operation 

A  number  of  very  decided  advantages  in 
favor  of  municipal  ownership  arise  at  the  very 
outset. 

City  Can  Borrow  Money  at  a  Lower  Rate  of 
Interest — For  example,  in  launching  a  munici- 
pal enterprise,  the  public  has  an  initial  advan- 
tage in  the  fact  that  a  city  can  borrow  money 


ADVANTAGES  81 

at  a  lower  rate  of  interest  than  private  indi- 
viduals or  corporations.  The  government  has 
no  trouble  in  borrowing  money  at  2  per  cent, 
and  3  per  cent.,  and  the  highest  paid  is  4  per 
cent.  Cities  do  nearly  as  well.  The  average 
rate  of  interest  paid  by  all  cities  in  the  United 
States  on  their  total  debt  is  3  per  cent.1  Frank 
Parsons  found  in  his  investigation  that  cities 
were  able  to  borrow  money  at  from  2  to  4  per 
cent,  less  than  private  companies.2 

A  Public  Plant  Does  Not  Have  to  Pay  Divi- 
dends on  Watered  Stock — We  have  shown  to 
what  extent  the  private  companies  are  over- 
capitalized. Every  dollar  of  overcapitalization 
is  a  burden  upon  the  plant.  Municipal  owner- 
ship, by  eliminating  all  watered  stock  and  all 
overcapitalization,  relieves  the  utility  of  that 
burden. 

Under  Complete  Municipal  Ownership  no  In- 
terest nor  Dividends  at  all  Need  be  Paid — Dur- 
ing the  period  that  a  city  is  accumulating  the 
funds  to  pay  for  a  plant  that  has  been  pur- 
chased or  built,  a  city  must  pay  interest  on 

1  Bulletin  No.  126,  United  States  Census  on  Financial  Sta- 
tistics of  Cities. 

2  "City  for  the  People,"  p.  139. 


82  MUNICIPAL  OWNERSHIP 

the  money  borrowed,  of  course.  But  when  the 
bonds  are  finally  fully  paid  off  and  the  plant  is 
once  owned,  free  of  incumbrance,  thenceforth 
the  city  has  no  interest  to  pay.  It  must  provide 
for  the  depreciation  of  the  plant  and  for  all 
necessary  expenses  and  it  may  allow  a  small 
profit  which  is  turned  over  to  the  common 
funds,  but  it  does  not  need  to  do  so.  A,  public 
utility  as  a  general  thing  is  conducted  on  the 
basis  of  cost  of  operation.  The  postal  depart- 
ment is  so  conducted  now. 

In  this  way,  under  complete  municipal  owner- 
ship, the  city  and  its  people  will  be  relieved  of 
the  entire  burden  of  the  interest  and  dividend 
charges  which  are  now  exacted  under  the  system 
of  private  ownership. 

Again,  the  cost  of  insurance  is  less  under  mu- 
nicipal ownership,  for  the  city  by  carrying  its 
own  insurance  escapes  the  excessive  charges  of 
the  private  insurance  companies.  The  saving 
there  has  been  estimated  at  about  2  per  cent,  on 
the  investment,  which  made  a  difference  of  $2 
a  year  per  light  in  the  cost  of  production.3 

No  Corruption  Funds  Under  Municipal  Own- 
ersMp — The  enormous  sums  of  money  that 

3  "City  for  the  People,"  by  Frank  Parsons,  p.  136. 


ADVANTAGES  83 

have  been  paid,  and  whatever  are  yet  being  paid 
in  any  way  to  influence  city  councils  and  public 
officials  to  give  franchises  and  other  privileges 
to  private  utility  companies — all  that  will  be 
entirely  avoided  under  municipal  ownership. 
And  all  these  expenses  are  paid  by  the  people 
in  the  long  run. 

The  Enormous  Cost  of  "Regulation"  will  be 
Saved  Under  Municipal  Ownership — New  York 
State  now  has  two  commissions  at  work  on 
the  problem  of  the  regulation  of  its  public  utili- 
ties, each  costing  over  a  million  dollars  a  year. 
The  Wisconsin  commission  costs  $200,000  a 
year,  to  say  nothing  of  the  extra  cost  of  the 
hearings  and  litigation  involved.  Illinois  has 
a  similar  rate  commission  with  its  burden  of 
expenses,  to  say  nothing  of  the  cost  and  the 
time  and  effort  required  in  the  fight  to  "  regu- 
late ' '  the  private  corporations,  and  then,  on  top 
of  all  that,  Chicago  has  a  board  of  supervising 
engineers,  which  costs  the  city  $233,235  a  year 
and  is  supposed  to  perfect  the  system  of  regu- 
lation. Thus  the  people  of  Chicago  must  pay : 
first,  the  expenses  of  the  operation  of  their 
street  car  lines  with  all  the  watered  stock,  jug- 
gled finance,  political  corruption,  excessive 


84  MUNICIPAL  OWNERSHIP 

rates,  and  enormous  profits,  and  the  big  salaries 
of  the  official  managers  and  superintendents; 
then,  in  addition  to  that,  they  must  pay  also 
their  share  of  the  cost  of  a  state  commission  in 
order  that  they  may  not  be  entirely  consumed  by 
the  private  companies.  And  then,  as  though  all 
this  were  not  enough,  they  have  still  to  bear  the 
expense  of  expert  regulators  of  their  own,  one 
that  costs  them  over  $230,000  a  year.  All  this 
burden  of  the  cost  of  "regulation"  would  be 
saved  under  municipal  ownership. 

Besides  these  advantages  in  the  organization 
and  conduct  of  public  utilities  under  municipal 
ownership,  there  are  yet  others  of  importance 
that  would  be  secured  in  the  actual  operation  of 
the  plants.  For  example,  under  municipal 
ownership  the  whole  question  of  competition, 
with  its  needless  and  expensive  duplication, 
added  cost  and  inconvenience,  is  settled.  The 
big  salaries  which  are  so  often  paid  under  pri- 
vate operation  are  all  out  of  proportion  to  the 
value  of  the  service  rendered  and  very  much 
higher  than  is  found  necessary  under  municipal 
ownership.  In  Philadelphia,  for  example,  the 
head  of  the  municipal  gas  plant  received  $5500 


ADVANTAGES  85 

per  year,  while  the  president  of  the  private  gas 
plant  in  Boston  received  $25,000  and  the  treas- 
urer $22,000.  These  are  only  typical  cases.4 

Coordination  of  Public  Utilities — And  finally, 
municipal  ownership  enables  a  city  to  coordinate 
its  utilities  and  thus  secure  great  advantage  in 
economy  and  efficiency  of  operation.  For  ex- 
ample, a  waterworks  plant  may  be  combined 
with  an  electric  light  plant.  A  street  car  sys- 
tem should  be  combined  with  a  light  and  power 
system  and  all  be  operated  as  a  unit.  A  light 
plant  should  be  combined  with  a  power  plant  so 
that  the  same  equipment  could  be  used  for  the 
day  load  for  power  and  the  night  load  for  light. 
In  fact,  under  a  proper  system  of  municipal 
ownership  all  the  utilities  could  be  thus  co- 
ordinated to  great  advantage. 

And,  as  the  system  of  municipal  ownership 
developed,  a  league  of  cooperating  cities  could 
be  found  which  would  secure  the  advantages  of 
cooperation  and  the  coordination  of  public  utili- 
ties, intercity  and  statewide  in  their  extent. 

*  "City  for  the  People,"  by  Frank  Parsons,  p.  140. 


86  MUNICIPAL  OWNERSHIP 

2.  Advantages  to  the  Public 

Among  the  advantages  that  would  accrue  to 
the  general  public  through  municipal  ownership 
may  be  mentioned  the  following : 

Lower  Rates — Experience  everywhere  has 
put  this  matter  beyond  doubt.  In  England,  for 
example,  where  municipal  ownership  is  quite 
general  and  where  the  experience  extends  over 
a  period  of  half  a  century,  rates  on  street  car 
service  have  been  reduced  to  an  average  of  2.1 
cents  per  ride,  and  in  Scotland  to  1.9  cents. 

Moreover,  while  the  average  fare  paid  on  all 
the  136  municipal  street  railways  in  England  is 
2.1  cents,  the  average  fare  paid  on  the  138  pri- 
vate companies  is  2.48  cents.  In  Germany, 
similarly,  the  street  car  rates  have  been  reduced 
to  an  average  of  2%  cents  per  ride.5 

Similarly  with  gas;  the  average  charge  in 
England  by  private  companies  is  66  cents  per 
thousand  feet.  Municipal  plants  have  reduced 
the  average  to  60  cents.6 

Coming  a  little  nearer  home,  Toronto  has 

s  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  pp.  203,  204,  206. 
e  Idem.,  p.  206. 


ADVANTAGES  87 

succeeded  in  reducing  the  rates  for  electricity 
from  33%  to  40  per  cent.,  as  a  result  of  her 
municipal  plant,7  while  Winnipeg  has  brought 
down  the  price  of  electricity  from  20  cents  per 
kilowatt,  which  was  charged  by  the  private  plant 
previous  to  municipal  ownership,  to  3  cents.8 

In  the  United  States  similar  results  have  been 
achieved.  In  Seattle,  Washington,  for  exam- 
ple, a  private  company  was  charging  20  cents 
per  k.w.h.  in  1901.  A  municipal  plant  has  re- 
duced the  rates  to  6  cents  and  even  lower.9 

Private  companies  charged  Chicago  $137.50 
per  arc  light  per  year ;  the  city  was  able  to  sup- 
ply a  similar  service  for  $83.67.  The  following 
table  shows  rates  charged  for  electricity  under 
private  and  public  ownership: 

Private  Public 

Chicago    $.10  Cleveland  $.03 

Brooklyn    12  Pasadena    05 

Milwaukee    11  Fort  Wayne    03@  .08 

Philadelphia    10  Hamilton    02%  @  .08 

Pittsburg   10  Seattle    06 

Providence   10@  .12  Tacoma  06 

New  York   10@  .15  Jacksonville    07 

Average    103-7  Average    44-7 

t  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  pp.  248-9. 

s  Idem.,  p.  77. 

» Annual  Report  of  the  Seattle  Lighting  Department  for 
1912-1913. 


88  MUNICIPAL  OWNERSHIP 

Thus  it  appears  that  it  costs  on  an  average 
5%  cents  per  k.w.h.  more  for  electricity  un- 
der private  ownership  than  it  does  under 
public  ownership.  In  other  words,  it  costs 
more  than  twice  as  much.  A  comparison  of  the 
rates  charged  for  electricity  in  about  150  cities 
in  the  United  States  indicates  that  the  rates 
charged  under  private  ownership  range  from 
about  10  cents  per  k.w.h.  upward,  and  the  rates 
under  public  ownership  range  from  10  cents 
per  k.w.h.  downward. 

As  illustrating  the  possibilities  of  municipal 
ownership  in  the  matter  of  electric  lighting,  Pro- 
fessor Frank  Parsons  has  prepared  the  table 
which  appears  on  the  following  page. 

Perhaps  one  of  the  most  striking  illustrations 
of  what  municipal  ownership  can  do  in  this  re- 
spect is  illustrated  by  the  experience  of  Pasa- 
dena, California.  The  people  were  paying  15 
cents  per  k.w.h.  up  to  1908.  Then  a  municipal 
plant  was  projected.  The  company  at  once  re- 
duced its  rates  to  12%  cents  per  k.w.h.  The 
city,  however,  kept  on  with  its  project  and  it  was 
so  successful  that  it  was  found  possible  to  re- 
duce the  rates  first  to  8  cents,  then  to  7,  and 
finally  to  5  cents  per  k.w.h.  In  each  case  the 


ADVANTAGES 


89 


Cost  of  Electric  Light  Before  and  After  Public 
Oivnership  10 

Total  cost  per  lamp  year  for  electric  street  lights  before  and 
after  public  operation,  the  "after"  service  being  as  good  or 
better  than  the  service  it  replaced. 

BEFORE  AFTER  AFTEB 

Price  paid  pri-  Cost    per    arc  Cost  under  com- 
vate  company     including   op-     plete       public 

ownership  in- 
cluding oper- 
ating expenses, 
taxes,  insur- 
ance and  de- 
preciation but 
not  interest, 
there  being  no 
interest  when 
the  people  own 
the  plant  free 


per  street  arc  crating  ex- 
just  before  penses,  taxes, 
public  opera-  insurance  de- 
tion  began  p  r  e  c  i  ation 
and  interest 


Aurora,  111 

Elgin,  111 

Fairfield,   la 

Marshalltown,  la. 
Bay  City,  Mich 
Detroit,  Mich.. 
Allegheny,    Pa. 
Bangor,  Me.  . . 
Lewiston,   Me.. 
Peabody,  Mass. 


$325 
228 
375 
125 
100 
132 
180 
150 
182 
185 


$72 
65 
95 
40 
67 
83 
86 
58 
58 
73 


of  debt 
$61 
56 
80 
30 
58 
68 
76 
48 
52 
62 


company  finally  met  the  municipal  rates  and  in 
one  case  even  tried  to  break  the  support  of  the 
municipal  plant  by  underselling  at  a  loss  in 
Pasadena  and  making  up  the  loss  by  charging 
higher  rates  in  cities  nearby  in  which  it  also 
owned  plants.  This,  however,  was  stopped  by 

10  "City  for  the  People,"  by  Frank  Parsons,  p.  129. 


90  MUNICIPAL  OWNEESHIP 

the  state  legislature  and  the  company's  rate  now 
stands  at  5  cents,  the  same  as  the  municipal  rate. 
But  the  municipal  plant  brought  it  down  from 
20  cents  to  5  cents  and  the  city  has  saved 
itself  $731,083.96,  has  accumulated  a  surplus  of 
$71,110.08,  and  has  a  plant  valued  at  $557,- 
255.67.11 

The  price  charged  for  electricity  by  the  pri- 
vate company  in  Cleveland,  Ohio,  before  the 
city  installed  its  municipal  light  plant  was  12% 
cents  per  k.w.h.  The  municipal  plant  reduced 
the  rate  to  3  cents  per  k.w.h.  and  still  made  a 
profit  of  $217,721.41  during  1915.12 

The  municipal  plant  at  Tacoma,  Washing- 
ton, sells  electricity  as  low  as  1  cent  per  k.w.h. 
for  cooking  purposes;  and  Jacksonville,  Flor- 
ida, has  a  2-cent  rate  for  cooking  and  heating. 

In  North  Platte,  Nebraska,  during  a  recent 
agitation  for  a  municipal  electric  lighting  plant, 
the  city  council  appointed  a  special  committee 
to  investigate  the  question  of  rates  charged  for 
electricity  in  cities  of  about  the  population  of 
their  city  (about  5,000)  under  private  and 

11  Seventh  Annual  Report  of  Pasadena's  Municipal  Light- 
ing Works,  1913-14. 

12  Utilities  Magazine,  Philadelphia,  July,  1916,  pp.  9-16. 


ADVANTAGES 


91 


public  ownership.    The  following  table  is  taken 
from  the  report  of  this  special  committee : 


PRIMARY  RATES 


City 
Hast  in  ff  Neb 

Municipal 
6y2c 
12c 
lie 
9c 
9c 
15c 
15c 
12c 
lOc 
15c 
12c 
lOc 
lOc 
lOc 
12c 

Private 
15c 
15c 
lOc 
15c 
15c 
13c 
15c 
12c 
lOc 
18c 
13%c     . 
15c 
18c 
lOc 
lie 

Scliuyler  Neb  

Grand  Island,  Neb.. 
Fremont,  Neb  
Lincoln,  Neb  

Crete  Neb 

Wahoo,  Neb  

Kenesaw,  Neb  
Ottawa,  Kan  

Norton  Kan 

Eldorado,  Kan  

Webster  Iowa 

Atlantic,  Iowa  
Mt.  Pleasant,  Iowa. 
Vinton,  Iowa  

Average 

11  24c 

13.7c 

VI  RATES 
Private 
6c     .. 

8y2c.. 

10c     .. 
8c     .. 
12c     .. 
lOc     .. 
6y2c.. 
6c     .. 
lOc     .. 
lOc     .. 
6c     .. 
lOc     .. 
5c     .. 
lOc     .. 
7c     .. 

8.33c 

City 
Hasting,   Neb  
Scliuyler,  Neb  
Grand  Island,  Neb.. 
Fremont,  Neb  
Lincoln,  Neb  

MINIMU] 
Municipal 
6V2c 
8c 
lie 
00 
9c 
6c 
lOc 
lOc 
4c 
Gc 
8c 
lOc 
6c 
lOc 
6c 

7.97c 

Crete,  Neb;  
Wahoo,  Neb 

Kenesaw,  Neb  
Ottawa  Kan 

Norton,  Kan  
Eldorado,  Kan  
Webster,  Iowa  .... 
Atlantic,  Iowa  
Mt.  Pleasant,  Iowa. 
Vinton,  Iowa  .... 

Average  . 

City 

.York,  Neb. 
.Holdrege,   Neb. 
.Grand  Island,  Neb. 
.  Aurora,  Neb. 
.  McCook,  Neb. 
.Lincoln,  Neb. 
.  Sidney,  Neb. 
.Omaha,  Neb. 
.  Kearney,  Neb. 
.Lexington,  Neb. 
.  Beatrice,  Neb. 
.  North  Platte,  Neb. 
.  Columbus,  Neb. 
.Norfolk,  Neb. 
.  Peoria,  111. 


City 

.York,  Neb. 
.Holdrege,  Neb. 
.Grand  Island,  Neb. 
.  Aurora,  Neb. 
.  McCook,  Neb. 
.  Lincoln,   Neb. 
.  Sidney,  Neb. 
.  Omaha,  Neb. 
.Kearney,  Neb. 
.  Lexington,  Neb. 
.  Beatrice,  Neb. 
.  North  Platte,  Neb. 
.  Columbus,  Neb. 
.  Norfolk,  Neb. 
.  Peoria,  111. 


92  MUNICIPAL  OWNEESHIP 

From  this  it  appears  that  even  in  the  smaller 
cities  the  municipal  plants  are  giving  the  people 
a  little  better  rates  than  the  private  plants  are 
giving. 

In  waterworks  the  rates  charged  by  private 
plants,  taking  the  United  States  as  a  whole,  are 
43  per  cent,  more  per  family  than  those  charged 
by  municipal  plants.13 

One  rather  striking  and  significant  illustra- 
tion of  the  reduction  of  rates  through  municipal 
ownership  should  be  mentioned.  In  Zurich, 
Switzerland,  in  1907,  the  city,  finding  that  house 
rents  were  rising  rapidly,  appropriated  $500,000 
for  the  construction  of  225  houses.  The  matter 
was  approved  later  by  referendum  vote  and  the 
houses  built.  They  are  said  to  be  in  many  re- 
spects superior  to  those  built  by  private  enter- 
prise and  yet  the  rents  are  much  lower.  The 
following  shows  the  comparison  as  to  rents 
charged  by  private  capitalists  and  the  city : 

House  Rent  Under  Public  and  Private  Ownership 

Public  Private 

Two  rooms  and  kitchen $  76  per  year  $  85  per  year 

Three  rooms  and  kitchen 100  per  year  121  per  year 

Four  rooms  and  kitchen   120  per  year  180  per  year 

is  "City  for  the  People,"  by  Frank  Parsons,  pp.  121-122. 


ADVANTAGES  93 

In  this  case  the  municipal  ownership  of  houses 
reduced  the  rents  10  per  cent,  on  the  three-room 
apartments,  17  per  cent,  on  the  four-room  apart- 
ments, and  33%  per  cent,  on  the  five-room 
apartments.  Many  other  cities  in  Europe  and 
elsewhere  are  doing  the  same. 

Thus  everywhere  and  in  every  line  munici- 
pal ownership  results  in  the  reduction  of  rates, 
or  of  the  service  rendered. 

Better  Service — The  change  from  private  to 
municipal  ownership  is  in  nearly  every  case  at- 
tended with  an  immediate  improvement  of  the 
service.  In  Glasgow,  the  inauguration  of  mu- 
nicipal ownership  meant  also  the  immediate  in- 
troduction of  modern  and  up-to-date  methods  of 
operation  and  equipment.  The  lines  were  elec- 
trified, better  cars  were  installed,  and  other 
improvements  made.14  As  a  rule  better  service 
is  supplied  by  the  use  of  additional  cars,15  thus 
eliminating  overcrowding ; 10  and  a  better  qual- 
ity of  water  and  more  sanitary  conditions  by 

i*  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  pp.  196,  198. 

15  "Municipal  Ownership  in  Great  Britain,"  by  Frederic  C. 
Howe,  pp.  80-82. 

is  "European  Cities  at  Work,"  by  Frederic  C.  Howe,  p.  340. 


94  MUNICIPAL  OWNERSHIP 

municipal  water  plants ; 17  while  the  city  as  a 
rule  gets  the  advantage  of  free  or  at  least  a  low 
cost  of  fire  protection.18  And  finally  it  is  pretty 
well  agreed  that  a  better  system  of  extensions 
and  improvements  is  secured  under  municipal 
than  under  private  ownership.19 

Profits,  if  Any,  Go  to  the  People — It  is  not 
essential  that  there  should  be  a  profit  under 
municipal  ownership,  as  we  have  already 
pointed  out.  The  purpose  of  municipal  owner- 
ship is  not  profit  but  service.  And  the  right 
way  to  manage  a  public  utility  under  public 
ownership  is  to  manage  it  not  to  make  large 
profits,  but  to  improve,  extend,  and  perfect  the 
service  and  raise  the  conditions  of  labor. 
Moreover,  municipal  ownership  should  not  be 
used  as  a  means  of  making  profits  in  order  to 
reduce  taxes. 

However,  it  is  necessary  for  a  public  enter- 
prise to  be  so  conducted  that  it  will  provide 
interest  on  the  capital  borrowed  and  a  sinking 
fund  to  retire  the  loan.  These  are  only  the 
means  by  which  a  city  works  its  way  out  of  the 

IT  Report  of  the  Civic  Federation,  vol.  I,  pt.  I,  p.  128. 

IB  Idem.,  p.  129. 

i»  "City  for  the  People,"  Frank  Parsons,  pp.  169-171. 


ADVANTAGES  95 

grip  of  private  monopoly.  It  may  also  be  wise 
to  use  the  profits  of  one  public  utility  to  accumu- 
late public  funds  with  which  to  buy  other  utili- 
ties, but  aside  from  these  purposes  there  is  no 
reason  why  municipal  ownership  should  try  to 
make  profits. 

However,  as  showing  that  municipal  owner- 
ship is  entirely  practical,  even  from  the  financial 
standpoint,  it  is  worth  pointing  out  that  cities 
everywhere  are  making  profits  and  in  many 
cases  large  profits  on  their  plants.  And  what 
is  still  more  important,  when  they  do  make 
profits,  those  profits  go  to  the  people  and  not  to 
some  few  private  owners. 

In  Glasgow,  for  example,  the  net  profits  from 
its  municipal  street  railways  in  one  year  (1905) 
were  $1,609,987,  from  its  gas  plants  $271,930, 
from  its  electric  plants  $358,646,  from  its  water 
system  $284,246,  and  from  its  telephones  $56,246 
—a  total  of  $2,580,946  of  net  profits  in  a  single 
year  in  a  single  city  on  its  municipally  owned 
enterprises.20 

Mannheim,  in  Germany,  makes  a  net  profit  of 
$44,942  from  its  municipal  street  railways, 
$123,021  from  its  waterworks,  $165,641  from  its 

20  "The  British  City,"  Howe,  p.  197. 


96  MUNICIPAL  OWNERSHIP. 

gas  plants,  and  $127,366  from  its  electric  plants 
—a  total  of  $460,970  from  these  four  utilities 
alone  in  this  comparatively  small  city.21 

Berlin  made  a  clear  profit  of  $4,000,000  on 
its  municipal  gas  plants  alone  in  1913 ; 22  Liver- 
pool derives  a  revenue  of  $500,000  a  year  from 
the  rental  of  its  lands.23 

Here  in  the  United  States  municipal  plants 
have  also  made  profits,  in  some  cases  really 
great.  The  city  of  Chicago,  for  example,  is  now 
making  a  net  profit  of  over  $3,000,000  a  year  on 
its  water  system. 

The  city  of  Los  Angeles  has  installed  a  great 
water  system  in  recent  years  and  the  profits 
that  have  accrued  to  the  city  during  the  first 
eleven  years  of  its  operation  amount  to  $8,286,- 
531.14.24 

Philadelphia  is  said  to  make  a  profit  of  $900,- 
000  a  year;25  New  York  clears  over  $2,130,000 
a  year.26 

The  Chicago  municipal  electric  lighting  plants 

21  "European  Cities  at  Work,"  Howe,  p.  214. 

22  National  Municipal  Review,  July,  1914. 

23  "The  City  the  Hope  of  Democracy,"  Howe,  p.  154. 
2*  National  Municipal  Review,  January,   1915. 

25  "The  City  for  the  People,"  Parsons,  p.  144. 
2«  Idem.,  p.  144. 


ADVANTAGES  97 

are  said  to  have  saved  the  city  $743,494  besides 
paying  for  the  plants,  which  are  appraised  at 
$1,315,707.27 

Winnipeg  cleared  $60,000  on  its  electric  light 
and  power  plant  in  1913-14,  with  a  3-cent  per 
k.w.h.  rate.28  The  Tacoma,  Washington,  mu- 
nicipal plant  made  $321,944.75  last  year,29  and 
the  municipal  plant  in  the  little  city  of  Jackson- 
ville, Florida,  pays  one-third  of  the  entire  city 
taxes.30 

And  these,  of  course,  are  only  a  few  instances 
of  what  might  be  indefinitely  continued. 

Municipal  Ownership  Tends  to  Eliminate  Po- 
litical Corruption  and  to  Elevate  the  Civic 
Standard — The  best  governed  cities  in  the 
world  are  the  very  cities  where  there  is  most 
municipal  ownership.  The  municipal  govern- 
ment of  Germany  and,  next  to  that,  of  England, 
is  the  best  in  the  world.  And  the  cities  where 
municipal  corruption  has  reached  its  extremes 
are  the  cities  of  the  United  States,  where  we 

27  Report  of  National  Civic  Federation  on  Municipal  and 
Private  Operation  of  Public  Utilitiea,  vol.  I,  pt.  I,  pp.   178, 
180. 

28  Municipal  Journal,  Oct.  29,  1914. 

29  Idem.,  Apr.  8,  1915. 
so  Idem.,  Feb.  26,  1914. 


98  MUNICIPAL  OWNEBSHIP 

have  had  the  least  degree  of  municipal  owner- 
ship. 

And  there  is  a  very  natural  reason  for  these 
things.  When  a  city  takes  over  a  public  utility 
it  removes  that  much  of  the  public  service  oper- 
ations from  the  field  of  personal  and  political 
contention.  There  is  no  further  incentive  for 
men  to  try  to  bribe  city  officials,  commissions, 
or  state  legislatures  in  order  to  get  control  of 
that  utility.  And  the  more  of  the  public 
utilities  that  are  taken  over  the  less  of  the 
field  is  left  for  the  operation  of  corrupting  in- 
fluence. 

Moreover,  under  municipal  ownership,  if  mis- 
takes are  made  through  the  weakness  or  venial- 
ity  of  public  officials  in  one  administration,  such 
officials  may  be  eliminated  at  the  next  election 
and  the  mistakes  corrected.  But  under  private 
ownership  a  bad  city  council  may  grant  a  fran- 
chise for  20,  even  30  years,  and  it  is  practically 
impossible  for  the  people  to  extricate  them- 
selves. In  New  York  city,  for  example,  one 
notorious  Jacob  Sharp  managed  to  secure  a 
franchise  by  methods  so  flagrant  that  he  was 
caught  and  landed  in  the  penitentiary.  But  the 
franchise  held  good  just  the  same.  It  went  into 


ADVANTAGES  99 

the  hands  of  others  and  all  of  its  extortions  were 
practiced  on  the  people  to  the  end  of  its  term. 
Under  municipal  ownership  the  whole  situation 
could  have  been  corrected  at  the  next  election 
at  the  latest. 

Better  Social  and  Industrial  Adjustment — 
Municipal  ownership  tends  to  create  a  better  in- 
dustrial adjustment.  Because  of  better  wages, 
shorter  hours,  and  a  progressive  improvement 
in  labor  conditions,  there  are  fewer  labor  trou- 
bles and  strikes.  And  by  the  elimination  of  the 
excessive  rates  and  other  financial  extortions, 
and  especially  by  returning  the  profits,  if  any, 
to  the  public  funds,  the  concentration  of  wealth 
is  arrested  and  a  greater  diffusion  of  wealth 
effected. 

Herein  lies  what  seems  to  us  to  be  the  most 
important  consideration  in  favor  of  municipal 
ownership.  It  is  more  important  even  than  the 
fact  that  municipal  ownership  secures  better 
service,  lower  rates,  better  conditions  for  labor, 
and  the  other  advantages  we  have  enumerated. 
For  municipal  ownership,  tending  as  it  does  to 
a  diffusion  of  wealth  and  power,  contributes  to 
democracy  in  the  industrial  and  economic  life  of 
the  people.  And  industrial  democracy  is  the 


100         MUNICIPAL  OWNERSHIP 

very  cornerstone  of  our  civilization  and  the  only 
guarantee  of  future  progress. 

This  argument  has  been  so  well  stated  by 
Delos  F.  Wilcox  in  his  address  before  the  con- 
ference of  mayors  in  Philadelphia  that  we  pre- 
sent it  here : 

While  it  is  true  that  in  its  relation  to  public  utili- 
ties the  ultimate  demand  of  the  public  is  for  the  best 
possible  service  at  the  lowest  practicable  cost,  I  do  not 
admit  that  the  entire  case  is  to  be  determined  by  a 
comparison  of  the  rates  and  efficiency  of  operation  of 
individual  public  and  individual  private  plants.  .  .  . 
I  take  my  stand  for  the  immediate  adoption  of  the 
policy  of  ultimate  municipal  ownership  on  broader 
grounds.  I  need  not  repeat  what  I  have  already  said 
in  regard  to  the  recognized  public  character  of  these 
services.  I  need  not  go  at  length  into  the  difficulty 
of  adequately  regulating  a  private  monopoly.  I  need 
not  claim  greatly  reduced  rates  or  greatly  improved 
service  as  the  immediate  result  of  municipal  owner- 
ship. All  these  considerations  are  factors  in  the  great 
development  of  city  civilization  which  makes  ultimate 
municipal  ownership  of  public  utilities  appear  to  be 
inevitable,  whether  we  want  it  or  not.  But  back  of 
all  the  usual  arguments,  pro  and  con,  on  this  subject 
lies  the  fundamental  fact  that  the  existence  of  a  great 
body  of  private  capital  invested  in  the  public  streets 
is  a  continuing  menace  to  a  city 's  welfare. 

The  concentration  of  the  control  of  enormous  masses 


ADVANTAGES.  ici 

of  the  commonwealth  in  the  hands  of  a  few  men,  ir- 
responsible to  the  community  for  the  manner  in  which 
they  exercise  such  control,  is  in  itself  a  recognized 
menace  to  civilization.  This  applies  to  all  kinds  of 
enterprises,  but  when  we  come  to  public  utility  en- 
terprises, which  are  actually  performing  a  public 
function,  and  which  are  constantly  in  contact  with  the 
regularly  established  political  authorities,  and  which 
operate  by  means  of  easements  in  public  property,  the 
dangers  of  concentration  of  control  are  multiplied. 

It  is  well  known  that  in  the  great  cities  the  develop- 
ment of  land  values  is  such  as  to  make  it  impractica- 
ble for  the  majority  of  men  to  be  landholders.  Cities 
create  a  proletariat,  a  fourth  estate,  which,  in  propor- 
tion as  it  becomes  landless,  homeless  and  propertyless, 
becomes  a  dangerous  element  in  a  democracy.  Po- 
litical and  economic  stability  rest  upon  widespread 
participation  in  wealth.  The  conditions  that  prevail 
in  modern  cities  in  certain  respects  tend  to  cultivate 
the  most  dangerous  factors  in  democracy.  Cities  by 
their  very  nature  are  cooperative,  and  public  utilities, 
par  excellence,  are  the  visible  symbols  of  that  coop- 
eration. If  in  the  cities  we  are  passing  out  of  the 
stage  of  widespread  individual  ownership,  our  only 
safe  course  is  to  develop  a  strong  community  owner- 
ship, not  a  mere  sentimental  loyalty  attaching  to  the 
eity  that  we  love,  but  a  substantial,  universal,  economic 
interest  in  it.  Capital  is  too  valuable  to  society  to  be 
wastefully  destroyed.  We  all  respect  it.  If  we  de- 
stroy it,  we  are  destroying  that  which  ultimately  be- 


102         'MUNICIPAL  OWNERSHIP. 

longs  to  the  community.  The  public  ownership  of 
public  utilities,  which  is  merely  the  complete  public 
ownership  of  the  public  streets,  not  only  frees  the 
agents  of  the  people  from  the  compelling  influence  of 
invested  private  capital,  but  gives  those  agents  and 
the  people  they  represent  a  new  sense  of  responsibil- 
ity, a  new  sense  of  civic  loyalty  and  a  new  attitude 
of  conservatism,  all  of  which  are  of  the  utmost  im- 
portance in  the  orderly  development  of  our  civiliza- 
tion.31 

3.  Advantages  to  Labor 

The  more  alert  and  well  informed  of  the 
working  class  all  along  have  seen  the  advan- 
tages to  labor  in  municipal  and  public  owner- 
ship. From  the  beginning  they  have  taken  an 
active  part  in  the  campaigns  for  public  owner- 
ship. All  over  the  world  organized  labor  fa- 
vors municipal  ownership. 

Organized  Labor  Favors  Municipal  Owner- 
ship— The  American  Federation  of  Labor  has 
stood  officially  for  public  ownership  for  many 
years  and  officially  advocates  municipal  owner- 
ship in  particular.  At  its  annual  convention 
in  December,  1896,  it  passed  the  following  reso- 
lutions : 

si  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  vol.  LVII,  whole  No.  146,  pp.  17-18. 


ADVANTAGES  103 

Resolved,  that  the  sixteenth  annual  convention  of 
the  American  Federation  of  Labor  urges  upon  all  the 
members  of  affiliated  bodies  that  they  use  every  pos- 
sible effort  to  assist  in  the  substitution  in  all  public 
utilities,  municipal,  state  and  nation,  that  are  in  the 
nature  of  monopolies — of  public  ownership  for  cor- 
porate and  private  control.82 

In  a  leaflet  published  and  distributed  by  the 
national  headquarters  of  the  American  Feder- 
ation of  Labor  at  Washington,  D.  C.,  is  given 
"  A  Few  of  the  Declarations  of  the  A.  F.  of  L.," 
upon  which  it  appeals  to  all  working  people  to 
"  organize,  unite,  federate,  and  cement  the  bonds 
of  fraternity. "  And  among  those  demands 
Number  8  is  "the  municipal  ownership  of  pub- 
lic utilities." 

Thus  the  American  Federation  of  Labor 
stands  officially  in  favor  of  both  public  owner- 
ship and  municipal  ownership,  and  thus  is  in 
line  with  the  organized  labor  movement  of  the 
world  in  this  respect.  Some  of  the  affiliated 
bodies  are  even  more  emphatic. 

Perhaps  the  strongest  position  ever  taken  by 
any  of  the  American  unions  is  that  by  the  elec- 
trical workers.  In  their  official  organ,  The 

32  Report  of  proceedings,  p.  102. 


104         MUNICIPAL  OWNEKSHIP 

Electrical  Worker,  of  August  29, 1914,  they  pub- 
lish one  of  the  most  incisive  and  conclusive  ar- 
guments in  favor  of  municipal  ownership.  And 
the  whole  contention  is  that  municipal  owner- 
ship is  the  one  and  the  all-important  means  by 
which  the  labor  conditions  in  the  electrical  world 
can  be  improved.  They  show  that  municipal 
ownership  could  be  made  to  yield  $2300  per 
employee  a  year  in  higher  wages  and  better 
conditions.33 

The  International  Association  of  Machinists, 
in  its  official  platform,  urges  its  members  to 
vote  and  work,  among  other  things,  for  the 
"public  ownership  of  all  public  utilities." 34 

Everywhere  in  Europe  the  organized  labor 
movement  favors  and  is  committed  to  municipal 
ownership.  The  trades-union  convention  of 
England  at  its  session  in  1905  adopted  without 
debate  a  resolution  urging  its  parliamentary 
committee  to  "bring  all  possible  pressure  to 
bear  upon  the  members  of  parliament  and  other 
public  representatives,  so  that  public  bodies 
may  be  empowered  to  enter  into  and  carry  on 

33  p.  1229  ff. 

34  See  Machinists'  Journal,  almost  any  number — the  declara- 
tion of  principles  is  kept  standing. 


ADVANTAGES  106 

any  work  or  business  in  behalf  of  the  people  so 
as  to  steady  the  volume  of  work  and  provide 
work  at  fair  rates  for  those  who  would  be  other- 
wise idle."35 

In  Switzerland,  when  the  question  of  estab- 
lishing government  ownership  was  agitating  the 
nation,  the  trade  unions,  including  the  power- 
ful organization  of  railway  employees,  all  ac- 
tively favored  the  law.  The  central  body  of 
the  Swiss  unions  "decided  unanimously  to  ask 
the  societies  to  work  to  the  measure  of  their 
power  in  favor  of  the  adoption  of  the  purchase 
laws."36 

From  this  it  will  appear  that  the  organized 
labor  movement  in  the  world  is  practically  a 
unit  on  the  matter  of  municipal  ownership.  Its 
long  and  world- wide  experience  has  convinced  it 
that  its  interests  fare  better  under  municipal 
than  under  private  ownership. 

Municipal  Ownership  Pays  Better  Wages  and 
Gives  Better  Hours — In  England,  for  example, 
municipal  ownership  of  street  car  lines  has  re- 
sulted in  a  reduction  of  48  per  cent,  in  the  hours 

35  National  Civic  Federation  Report  on  Municipal  and  Pri- 
vate Operation  of  Public  Utilities,  vol.  II,  pt.  2,  p.  58. 
«6  "Railways,  Trusts  and  the  People,"  Parsons,  p.  360. 


106         MUNICIPAL  OWNERSHIP 

and  an  increase  of  42  per  cent,  in  wages.37  The 
betterment  of  labor  conditions  in  London  alone 
is  said  to  amount  to  $200,000  a  year,  while  in 
Glasgow  it  is  estimated  to  amount  to  $500,000 
a  year.  Moreover,  these  increases  of  wages  are 
progressive.  For  example,  in  September,  1912, 
the  Labor  party  in  Glasgow  secured  an  increase 
of  from  25  to  50  cents  a  week  for  thousands  of 
public  employees  in  the  gas,  street  car,  and 
other  public  works.  The  total  additional  ex- 
penditure involved  in  this  increase  amounted 
to  $45,000.38 

All-round  increases  of  wages  on  account  of 
the  increased  cost  of  living  are  a  general  rule 
with  German  municipalities,  and  the  Kom- 
munales  Jahrbuch,  1912-13,  gives  details  of 
eighty-four  cities  which  during  the  year  had 
granted  such  increases.39 

On  many  of  the  state-owned  railways  of  the 
Continent  the  wages  of  all  workers  have  been 
raised  even  without  previous  demands  from  the 
men,  on  account  of  the  increased  cost  of  liv- 
ing.40 

37  "The  British  City,"  Howe,  p.  141. 

*s  "Collectivist  State  in  the  Making,"  Davies,  p.  254. 

wldem.,  p.  195. 

40  Idem.,  p.  195. 


ADVANTAGES  107 

In  Manchester  the  hours  of  labor  were  re- 
duced from  70  to  54  a  week  by  municipal  owner- 
ship, while  the  wages  were  not  reduced.41 

The  following  table  is  taken  from  the  report 
of  the  National  Civic  Federation  on  "  Municipal 
and  Private  Operation  of  Public  Utilities, " 
vol.  I,  part  1,  p.  280: 

Wages  and  Hours  of  Labor  on  Municipal  and  Private 
Street  Railways  in  England 

PuUic  Ownership  Private  Ownership 

Hours  Maximum  II ours  Maximum 

per     pay  per      per  pay  per 

week      week       week  iceek 

Glasgow    54      $7.44         70  $0.24  ...London  United 

Manchester...     54         7.44          70  6.78   ...  Dublin  United 
Liverpool    ....     60        7.50          70        6.72   . .  .Norwich 
London  C.   C..     60        9.00          70        6.12   ...Bristol 

Average  ....     57      $7.84          70      $7.20 

In  Paris  the  wages  of  the  municipal  em- 
ployees have  been  raised  from  an  average  of 
$259  to  $441.77,  an  increase  of  over  70  per  cent., 
and  at  the  same  time  the  hours  of  labor  have 
been  reduced.  Similarly  the  wages  of  the  em- 
ployees on  the  public  railways  have  been  in- 
creased over  60  per  cent.42  We  know  of  no 

4i  Municipal  Ownership  in  Great  Britain,  Bulletin  No.  62, 
U.  S.  Department  of  Commerce  and  Labor,  1906,  p.  104. 
*2  "Collectivist  State  in  the  Making,"  Davies,  pp.  254-256. 


108          MUNICIPAL  OWNERSHIP 

such  increases  of  wages  on  private  enterprises 
anywhere. 

Here  in  America  the  story  is  the  same.  The 
study  of  labor  conditions  made  by  John  E.  Com- 
mons in  connection  with  the  investigation  made 
by  the  National  Civic  Federation  brought  out 
the  following  facts  with  regard  to  hours  and 
wages  under  public,  as  compared  with  private 
ownership  and  operation  in  the  United  States : 

Municipal  Private 

Wages  Hours  Wages  Hours 

Syracuse   $1.50            8  $1.50  10 

Detroit    1.75            8  1.60  9 

Allegheny      2.75              8  1.75  10 

Wheeling    1.85             8  1.85  10 

Cleveland    1.76            8  1.75  10 

Indianapolis   1.60             8  1.50  10 

Chicago     2.00            8  1.75  10 

New  Haven    1.50            8  1.50  9 

Richmond    2.00            9  1.20  9 

Atlanta    1.00          10  1.00  10 

Average    $1.77  8%  $1.56  9% 

In  gas  works  the  hours  are  generally  eight  a 
day  under  municipal  ownership,  and  twelve 
under  private,  while  the  wages  are  from  30  to 
130  per  cent,  higher. 

The  wages  of  the  employees  on  the  Chicago 
municipal  waterworks  and  the  municipal  light- 
ing plants  are  the  highest  of  their  kind  in  Amer- 


ADVANTAGES  109 

ica.43  Private  water  plants  in  the  vicinity  of 
Chicago  pay  an  average  of  26  cents  an  hour  in 
wages.  The  Chicago  municipal  plant  pays  42 
cents.44 

The  municipal  street  railway  of  San  Fran- 
cisco pays  its  employees  $3  a  day  for  an  eight- 
hour  day.  The  private  companies  pay  their 
men  $1.50  to  $1.70  a  day  for  a  ten-hour  day. 

Thus  in  every  direction  labor  conditions  are 
immediately  improved  by  public  ownership,  and 
what  is  even  more  important,  they  continue  to 
improve  steadily.  Take  the  case  of  the  govern- 
ment employees  as  an  illustration.  While  the 
treatment  of  labor  in  the  postal  department  is 
not  in  all  cases  by  any  means  what  it  ought  to  be, 
so  that  the  unions  are  often  protesting  against 
the  treatment  received,  the  fact  remains  that  in 
many  respects  it  is  better  than  under  private 
employment.  If  we  compare  the  railway  mail 
clerks  and  postal  carriers  who  work  for  Uncle 
Sam  with  private  employees  in  similar  lines,  we 
find  that  the  hours  of  labor  average  2%  hours 

43  Annals  of  the  American  Academy  of  Political  and  Social 
Science,  January,  1915,  vol.  LVII,  whole  No.  146,  pp.  38-39. 

4*  Report  of  Commission  on  City  Expenditures  on  the 
Water  Works  Commission  of  the  City  of  Chicago,  1911,  p.  10. 


110          MUNICIPAL  OWNEESHIP 

less  a  day,  and  the  wages  average  $375  a  year 
more  in  the  public  than  in  the  private  employ- 
ment.45 

The  Federal  Government  has  been  a  pioneer 
in  reducing  the  hours  of  labor  of  its  employees. 
In  1840,  at  a  time  when  in  private  employment 
eleven  or  twelve  hours  was  the  rule,  an  order 
of  the  President  provided  for  ten  hours  in  all 
public  employment ;  and  again  in  1868,  after  pri- 
vate employment  had  reached  the  standard  of 
ten  hours,  Congress  reduced  the  hours  for  pub- 
lic employees  to  eight.  The  hours  of  the  cleri- 
cal and  official  force  are  6%  to  7%  hours  a  day. 

State  governments  and  city  authorities  have 
followed  the  Federal  Government  in  the  adop- 
tion of  the  eight-hour  day.  New  York  was  the 
first  city  to  introduce  it  in  1870.  At  present 
there  are  eight  or  nine  States  which  prescribe 
the  eight-hour  day  on  all  public  works.46 

It  is  facts  like  these,  steadily  accumulating 
in  number  and  conclusiveness,  that  has  put  the 
labor  movement  on  the  side  of  public  and  mu- 
nicipal ownership.  They  see  that  it  is  the  most 

45  "City  for  the  People,"  Parsons,  tables  on  pp.  164-165. 

46  "Trades  Unionism  and  Labor  Problems,"  John  K.  Com- 
mons, p.  478. 


ADVANTAGES  111 

effective  means  of  securing  the  chief  objects  of 
their  struggles,  viz.,  the  increase  in  wages  and 
the  reduction  of  hours. 

Municipal  Ownership  Reduces  the  Cost  of 
Living — We  have  shown  above  how  municipal 
ownership  has  reduced  the  cost  of  water,  gas, 
light,  street  car  service,  and  even  rent.  Every 
one  of  these  items  enters  into  the  cost  of  living. 
And  this  for  labor  is  a  most  vital  and  serious 
problem.  The  reduction  of  the  rates  charged 
for  these  necessities,  as  we  have  shown,  has 
amounted  to  from  10  and  15  per  cent,  to  as  high 
as  50  and  even  65  per  cent,  through  municipal 
ownership.  That  is  a  tremendous  saving  in  the 
cost  of  living  and  constitutes  another  strong 
argument  for  municipal  ownership. 

Fewer  Strikes  and  Labor  Troubles — Under 
private  ownership  the  strike  is  the  only  method 
by  which  labor  can  finally  protect  itself  or  en- 
force its  demands.  It  is  a  clumsy  and  a  fear- 
fully costly  weapon  to  wield,  and  besides  it  is 
far  from  being  universally  successful.  Under 
municipal  ownership,  in  the  first  place,  it  is 
found  that  the  public  is  readier  to  grant  any 
reasonable  demand  of  labor  because  the  public 
is  not  so  concerned  to  make  a  profit.  Besides, 


MUNICIPAL  OWNERSHIP 

under  municipal  ownership  labor  has  a  share  in 
the  control  of  the  utilities  by  reason  of  the  bal- 
lot. Labor  can  elect  its  own  representatives  to 
the  governing  body  and  thus  secure  a  recogni- 
tion of  its  rights.  Furthermore,  in  the  public 
ownership  movement,  already  plans  are  being 
devised  by  which  the  workers  shall  have  repre- 
sentatives upon  the  commissions  charged  with 
the  control  of  public  utilities.  It  is  certain  that 
as  municipal  ownership  extends  to  more  and 
more  of  our  public  utilities  labor  will  give  its 
attention  to  better  organization  politically  as 
well  as  otherwise,  and  that  in  this  way  its  rea- 
sonable demands  may  all  be  achieved  more 
easily,  quickly,  and  cheaply  than  under  the  sys- 
tem of  private  ownership. 

Indeed,  it  is  precisely  this  that  is  urged 
against  municipal  ownership  by  its  enemies. 
They  argue  that  it  would  make  it  too  easy  for 
labor  to  get  improved  conditions.47 

Other  Advantages  to  Labor — Besides  the  ad- 
vantages mentioned  above  there  are  others 
which  may  be  merely  mentioned.  Municipal 
ownership  is  more  generous  to  labor  in  the  mat- 

«  "Collectivist  State  in  the  Making,"  Davies,  pp.  9,  191- 
202,  252-253. 


ADVANTAGES  113 

ter  of  holidays  and  rest  days  than  private  enter- 
prise.48 

In  providing  uniforms,  rest  rooms,  vestibules 
for  the  protection  of  motormen,  and  similar 
comforts  and  conveniences,  the  municipalities 
have  shown  themselves  more  generous  and 
ready  to  act  for  labor  than  private  companies.49 
Municipal  ownership  is  also  much  more  gener- 
ous to  labor  in  the  matter  of  providing  for  relief 
in  sickness,  accident,  old  age,  and  even  in  the 
case  of  unemployment.50  And,  finally,  it  is  the 
municipalities  alone  that  are  helping  the  work- 
ers to  solve  their  housing  problems,  which  they 
are  doing,  as  we  have  explained,  through  the 
municipal  ownership  first  of  land  and  then  of 
houses. 

In  Conclusion 

Keviewing  the  whole  situation,  it  is  clear  that 
labor  stands  to  gain  by  municipal  ownership; 
the  "consumers"  or  the  users  of  the  public 
utilities  stand  to  gain  by  municipal  ownership, 
and  the  public  stands  to  gain  by  municipal  own- 
ership. Only  those  who  own  and  operate  the 

48  "City  for  the  People,"  Parsons,  p.  160. 

40  Idem.,  pp.  98-99. 

so  "European  Cities  at  Work,"  Howe,  pp.  124-142. 


114          MUNICIPAL  OWNERSHIP 

utilities  stand  to  lose — and  theirs  will  be  only  a 
temporary  loss  that  will  more  than  be  made  up 
to  them,  we  verily  believe^  in  the  vastly  greater 
gains  of  the  common  good. 


14  DAY  USE 

RETURN  TO  DESK  FROM 


ROWED 


TO  DESK  FROM  WHICH  BOR 

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